Activist: Liberty Global's Spinning Wrong Way

Liberty Global's assets also include stakes it owns in Sumitomo and News Corp. (NWS Quote). These investments were worth $682 million at the end of June using fair value accounting. Both companies dropped 25% in the third quarter, and more in October.

When you stack up Liberty Global vs. Comcast, Liberty Global's valuation still appears too rich. Liberty Global's trailing price-to-earnings ratio is 98, with a forward P/E of 26. That is starkly higher than Comcast's trailing P/E of 16.8 and forward P/E of 13. Liberty Global also has a much lower operating margin, return on assets, and return on equity compared to Comcast. Additionally, Liberty Global's debt-to-equity ratio stands at 3.84 vs. 0.81 for Comcast.

We have seen highly levered companies with high P/E ratios -- such as Las Vegas Sands (LVS Quote) and MGM (MGM Quote) -- punished in the last few weeks, even though they had both experienced significant sell-offs over the last eight months. (Las Vegas Sands' debt-to-equity ratio is only slightly larger than Liberty Global's.) Liberty Global needs to win back the trust of shareholders by simplifying its corporate structure and fully explaining the extent of its currency exposure in next month's analyst call. Until then, investors should follow John Malone's lead and stay away from Liberty Global.