DISCA/DISCK is a GARP stock unless you believe that the cable TV content business is broken.
Current price :$25; Earnings :$1.9 (2016). post tax free cash flow ~ post tax earnings , so you get a 7% FCF yield. Organic revenue growth is is single digit (~7-8%), but currency headwinds whittle this down to 2% currently and that seems to be putting pressure on the stock.
The company is a cannibal and can buy back ~5% of their shares at current multiples, so I think we could see low double digits earnings growth (7-8% organic and 5% for reduced share count due to buybacks). This looks attractive to me.
Balance sheet is levered, but they laddered out their bind maturities, so interest rate changes won't do much. They spent about 15% of their operating income on interest expensive, which is manageable.
I own some, but I think I will buy more. In a market where there aren't many bargains, this seems like a reasonable deal, especially considering that Malone owns 29% of the shares and likely will do something, if he thinks it's cheap enough.
FWIW, I sold my NSRGY position today after looking at the valuation. A PE of 22x and 15 X EV/EBITDA is rich, even considering the superb quality of the company. |
