Scripps: Lifestyle Leader

03/15/2016 7:00 am EST


The fast-money trading game is not my cup of tea. I have stubbornly stuck to my value approach, explains Roy Ward, editor of Cabot Benjamin Graham Value Investor.

Since launching HGTV in 1994, Scripps Networks Interactive (SNI) has diversified into lifestyle media, developing content for TV, the Internet, books, magazines and emerging media platforms.

Its media brands now also include Food Network, DIY Network, Cooking Channel, Travel Channel and Great American Country.

Scripps’ lifestyle media has also created websites that serve the food, home and travel industries. Its channels are available in the UK, other European markets, the Middle East, Africa and Asia-Pacific.

New program content and an expanded international presence are fueling rapid advertising revenue growth, while strong cost management is aiding profits.

All of the company’s networks are delivering solid revenue gains. A recent independent market study revealed that four of the company’s six cable channels ranked in the top-10 networks for effective advertising. In that survey, Food and HGTV were ranked first and second.

Scripps expanded into Eastern Europe with the purchase of Polish broadcaster TVN for $1.8 billion.

TVN owns 12 channels, as well as a leading digital platform that will provide extensive expansion opportunities for Scripps.

Sales will likely increase 8% and EPS will rise 18% during the next 12-month period. The current P/E ratio of 13.6 is low compared to SNI’s 10-year historical average P/E of 17.6.

The current quarterly dividend provides a decent 1.6% yield. The addition of TVN will likely enable Scripps to beat estimates and help send SNI considerably higher from its current low price.

I expect SNI to advance 44% and reach my minimum sell price of $88.33 within two years. Buy SNI at $63.15 or below.

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