Despite a tumultuous period of change in the entertainment industry over the past several years, popular TV and Internet provider Comcast Corporation (CMCSA - Get Rating) has remained resilient. Its third-quarter revenue edged past Wall Street’s expectations due to a steady rebound in its theme parks and studios businesses.

As the battle between the Fed and sky-high inflation has heightened market volatility this year, the entertainment conglomerate’s shares have dropped more than 30% over the past year. However, it has gained 11.1% over the past three months, closing its last trading session at $34.62. It is trading 33.6% below its 52-week high price and has a 24-month beta of 0.63.

The company’s financial strength and commitment to enhancing shareholder value are reflected as CMCSA returned a whopping $4.7 billion to shareholders during the third quarter.

It pays a $1.08 per share dividend annually, translating to a 3.12% yield, which is higher than its 4-year average yield of 2.08%. The company’s dividend has grown at a CAGR of 8.9% over the past three years and 11.7% over the past five years. It has increased its dividends for five consecutive years and has been continuously paying dividends for the past 13 years.

Moreover, CMCSA announced that its Board of Directors increased its share repurchase program authorization to a total of $20.0 billion. As of September 30, 2022, Comcast had $19.5 billion available under its share repurchase authorization.

Here’s what could shape CMCSA’s performance in the near term:

Robust Financials

In the fiscal third quarter ended September 30, CMCSA’s Cable Communications revenue rose 2.6% year-over-year to $16.54 billion. Its adjusted EBITDA grew 5.9% year-over-year to $9.48 billion in the same quarter.

Also, its adjusted net income increased 4.5% year-over-year to $4.22 billion, while its adjusted EPS increased 10.3% year-over-year to $0.96.

Discounted Valuation

In terms of forward non-GAAP P/E, the stock is currently trading at 9.63x, which is 34.96% lower than the industry average of 14.81x. Its forward non-GAAP PEG multiple of 0.83x is 36.86% lower than the industry average of 1.31x.

Moreover, CMCSA’s forward Price/Cash Flow of 5.49x is 36.78% lower than the industry average of 8.69x, and its forward EV/EBIT of 10.51x is 28% lower than the industry average of 14.60x.

Strong Profitability

CMCSA’s trailing-12-month gross profit margin of 68.41% is 35.97% higher than the industry average of 50.32%. Also, its trailing-12-month EBIT and EBITDA margin of 18.91% and 30.40% are 104.46% and 60.38% higher than their respective industry averages of 9.25% and 18.95%.

Moreover, its trailing-12-month levered FCF margin of 9.35% is 16.90% higher than the 8% industry average. Its trailing-12-month ROTC multiple of 7.55% is 83.65% higher than its industry average of 4.11%.

POWR Ratings Reflect Solid Prospects

CMCSA has an overall rating of B, equating to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. CMCSA’s strong profitability justifies its B grade in Quality.

The stock is ranked first among the nine stocks in the Entertainment – TV & Internet Providers industry.

In addition to the ratings stated above, we have graded CMCSA for Growth, Stability, Sentiment, Value, and Momentum. Get all CMCSA ratings here.

Bottom Line

CMCSA’s stable dividend-paying record and share repurchases demonstrate its shareholder return-generating capabilities. Although the stock has slumped significantly this year, its robust fundamentals should help it soar in the near term. As the stock currently trades at a discount, this could be the opportunity to scoop up its shares.

CMCSA shares were trading at $35.15 per share on Thursday morning, up $0.53 (+1.53%). Year-to-date, CMCSA has declined -28.31%, versus a -18.15% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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