In recent quarters, investors have grown concerned that rising costs to ESPN and other networks will materially weaken results. The comparisons with 2010 are imprecise because Cablevision spun out its ownership of AMC Networks ( AMCX) this summer, but it now looks as if Cablevision could generate roughly $6.6 billion in sales and $2.2 billion in EBITDA in 2011. This means the EBITDA margin is dropping to 33% -- still a very solid number. But forget EBITDA. The real metric investors should focus on is free cash flow, which is likely to exceed $600 million this year. This means shares sport a free cash flow yield above 14%, which is among the highest free cash flow yields you will find anywhere. (To get to this figure, you simply take the cash flow projection -- $600 million -- and divide it by the stock's market cap -- which is about $4.17 billion.) As a point of reference, rivals such as Comcast ( CMCSA) and Charter Communications ( CHTR) sport free cash flow yields of around 10%. The robust free cash flow is currently being deployed to share buybacks. The total share count likely fell by roughly 20 million shares to 280 million shares in 2011.
Shares of Cablevision have fallen from a peak of $38 in February 2011 to a recent $15. Subtract the $12 value associated with the spin-off of AMC Networks this summer, and we're really talking about a fall from $26 to $15.