Home Shopping Network Yields Multiple Opportunities

HSN Inc. (NASDAQ: HSNI) may not be the most well known stock in the market, but its Home Shopping Network is nothing short of a lean, mean, retail machine. Since it began broadcasting in 1981, its flagship HSN television network has grown to reach about 95 million U.S. households, its catalog business has distributed more than 300 million magazines each year, and it has reached many more customers through its leading website and 11 retail and outlet stores.

These distribution channels generated nearly $3.3 billion in net sales and net income of about $131 million, or $2.25 per diluted share in FY 2012. Last quarter, the company reported revenues that increased 6 percent, adjusted EBITDA that jumped 7 percent, and diluted EPS from continuing operations that rose 30 percent to $0.79 per share. Perhaps the most important development, however, was the 45.1 percent digital sales penetration that was up 170 basis points year over year.

Despite the strong financial performance, HSN trades with a price-earnings to growth ratio of just 0.6x, suggesting that it may be undervalued relative to its growth rates. The companys price-earnings ratio of 20.7x is also significantly lower than the 50.8x industry average, while its price-sales ratio of 0.9x is lower than the 1.5x industry average. These metrics may be higher than its historical earnings, but are significant lower than its peers as seen here:


HSNI Multiples Comparison. Source: Morningstar.com