NEW YORK (TheStreet) -- Internet broadcasting and radio and television broadcasting are among the top seven industry groupings in the information industry in terms of growth between 2007 and 2013. Digital broadcasting in particular has shown the largest increase -- 113% over that period.
Fueled by changing viewing habits among the population and advances in technology, successful broadcasters are positioning themselves to deliver their services to various market segments 24/7 over the Web and across devices such as smart phones, smart TVs, and tablets.
So, what are the best broadcasting companies investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which three broadcasting companies made the list. And when you're done be sure to read about which online retail and e-commerce companies to buy now. Year-to-date returns are based on May 8, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.
Discovery Communications, Inc. operates as a media company. The company operates through U.S. Networks; International Networks; and Education and Other segments.
"We rate DISCOVERY COMMUNICATIONS INC (DISCA) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DISCA's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, DISCOVERY COMMUNICATIONS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for DISCOVERY COMMUNICATIONS INC is rather high; currently it is at 57.97%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, DISCA's net profit margin of 16.26% compares favorably to the industry average.
- Even though the current debt-to-equity ratio is 1.42, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.99 is weak.
- You can view the full analysis from the report here: DISCA Ratings Report