Stock Market Series

Are American Entertainment Companies Great To Buy and Hold Long-Term (Part 2)?

In the last post, we evaluated some of America’s entertainment companies to see whether they have long-term competitive advantage.   Most of them are not because the companies use debts to fund their operation.

In this post, we would look at Comcast Corporation, Viacom Inc. and Time Warner, Inc.

Comcast Corporation (NASDAQ:CMCSA) is an American multinational mass media conglomerate that is the largest broadcasting and cable television company in the world by revenue.  In addition, is the second-largest pay-TV company after AT&T,  largest cable TV company and largest home Internet service provider in the United States, and the USA’s third-largest home telephone service provider.  Comcast, headquarters in Philadelphia, Pennsylvania, operates some of the following network channels: NBC, Telemundo, E!, The Weather Channel, MSNBC, CNBC and USA Network.  Moreover, Comcast owns Universal Pictures and some of Universal Parks & Resorts in the world.

Here is the financial statement analysis of Comcast Corporation from 2013 to 2016 (Click here if you need a refresher on accounting formulas):

Screen Shot 2017-09-29 at 8.39.44 AM

Unfortunately, I do think I will invest in Comcast not only because of the high return on capital expenditure, but also of the high in debt to shareholders’ equity ratio (meaning the company is using debt to fund its operation) and high in selling, general and administrative expense (meaning high payroll).

Pursuing this further, Viacom Inc. (NASDAQ:VIA, NASDAQ:VIAB) is an American multinational media conglomerate with interests primarily in cinema and cable television.  It is currently the world’s sixth largest broadcasting and cable company in terms of revenue behind Comcast, The Walt Disney Company, Time Warner, 21st Century Fox and CBS Corporation.

Here is the financial statement analysis of Viacom Inc. from 2013 to 2016:

Screen Shot 2017-09-29 at 9.21.09 AM

Again, I do not think I will invest in Viacom Inc. because of the high debt to shareholders’ equity ratio and high selling, general, and administrative expense.

Lastly, Time Warner, Inc. (NYSE:TWX) is an American multinational mass media and entertainment conglomerate headquartered in New York City.  It is currently the world’s third largest entertainment company in terms of revenue, after Comcast and The Walt Disney Company.  Here are some of companies Time Warner currently owns and operates: HBO, Warner Bros., DC Comics and CNN.  

Here is the financial statement analysis of Time Warner, Inc. from 2013 to 2016:

Screen Shot 2017-09-29 at 9.56.24 AM

Likewise, I think Time Warner has no durable competitive advantage because of the negative retained earnings.

Ultimately, I think The Walt Disney Company is the only American entertainment company that has long-term competitive advantage and gives a decent return on dividends.

Although all American entertainment companies hold treasury shares, I feel they hold these shares just to protect themselves from a hostile takeover.  As an investor, I look at other figures as well when determining which companies to invest in.

So what do you think? Please feel free to drop any comments below! Catch you on the flip side!

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