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Morgan Stanley's 8 Best Stock Ideas for 2011

7. Scripps Networks (SNI - Get Report) is a lifestyle content and interactive services company. It owns Home and Garden Television, Food Network and Travel Channel, as well as associated Web sites.

Fundamentals: Scripps' 12-month sales have increased 27%. Third-quarter profit surged 56% to $102 million, or 61 cents a share, as revenue increased 40% to $509 million. The operating margin extended from 34% to 38%. Scripps has $417 million of cash and $884 million of debt, converting to a quick ratio of 4.9 and a debt-to-equity ratio of 0.5. A rebound in corporate advertising budgets has benefitted Scripps. Quarterly ad sales rose 34%.

Valuation: Scripps' stock sells for a trailing earnings multiple of 26, a sales multiple of 4.5 and a cash flow multiple of 19, 28%, 94% and 75% premiums to media industry averages. The shares are fairly valued based on book value and forward earnings. The stock's PEG ratio of 0.6 demonstrates a 40% discount to estimated long-run fair value. Morgan Stanley's bullish-scenario stock valuation is $75, suggesting 45% upside. Its bearish-scenario stock valuation is $37.

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