Is CBS Still an A+?

With shares of CBS Corporation (NYSE:CBS) trading at around $49.19, is CBS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

CBS relies heavily on entertainment. That being the case, let’s begin with television shows. The list below consists of the most popular CBS television shows and their IMDb ratings.

CSI 8.6

NCIS 7.7

The Big Bang Theory 8.6

Two and a Half Men 7.0

How I Met Your Mother 8.5

Criminal Minds 8.1

Person of Interest 8.3

The Good Wife 7.8

NCIS: Los Angeles 6.4

Elementary 7.6

2 Broke Girls 6.8

The Amazing Race 7.6

Blue Bloods 7.0

For the most part, these are very impressive ratings This is important, because popular shows lead to increased monetization opportunities with reruns, cable, and online streaming.

CBS management is optimistic about future prospects due to strong demand for its content. Currently, CBS is enjoying higher advertisement revenues as well as an increase in affiliate subscription fees. This is in addition to decreased interest expenses. Does the story get even better, or is there danger lurking somewhere?

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The chart below shows some basic fundamentals for CBS, News Corp. (NASDAQ:NWS), and The Walt Disney Company (NYSE:DIS).

CBS NWS DIS
Trailing P/E 19.47 12.91 19.11
Forward P/E 14.52 16.62 16.01
Profit Margin 11.54% 16.68% 13.64%
ROE 17.56% 19.56% 15.43%
Operating Cash Flow 1.76B 3.83B 7.72B
Dividend Yield 1.00% 0.50% 1.20%
Short Position 2.60% 1.00% 2.40%

Let’s take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Strong

CBS has performed exceptionally well over the past three years. There have been no indications of a slowdown.

1 Month Year-To-Date 1 Year 3 Year
CBS 4.54% 30.44% 65.27% 252.1%
NWS 0.88% 23.20% 73.20% 114.3%
DIS -1.25% 26.69% 44.25% 89.51%

At $49.19, CBS is trading above its averages.

50-Day SMA 48.08
200-Day SMA 42.65

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for CBS is stronger than the industry average of 1.10.

Debt-To-Equity Cash Long-Term Debt
CBS 0.69 409.00M 6.47B
NWS 0.49 9.32B 16.47B
DIS 0.38 3.95B 16.94B

E = Earnings Are Strong

CBS seems to be very focused on the bottom line, which is good news for investors.

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Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 13,950 13,015 14,060 14,245 14,089
Diluted EPS ($) -17.43 0.33 1.04 1.92 2.39

When we look at the last quarter on a year-over-year basis, we see improvements in revenue and earnings. Revenue and earnings have also improved on a sequential basis.

Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in millions 3,924 3,476 3,418 3,698 4,040
Diluted EPS ($) 0.54 0.65 0.60 0.60 0.69

Now let’s take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

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Conclusion

Healthy EPS growth is likely for CBS. Revenue has been inconsistent on an annual basis, but it has been impressive over the past two quarters. Margins and cash flow are strong, and CBS is always looking to make strategic acquisitions to help fuel growth. Another positive is that analysts love the stock: 22 Buy, 7 Hold, 0 Sell. The biggest potential threat is a steep market correction (CBS isn’t very resilient). For those looking for something safer, Disney is a much better option. For those looking to ride the momentum wave, CBS is an OUTPERFORM.

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All content posted should not be considered professional advice. Please do your own research and consult with a professional financial advisor before making any investment decisions. I don’t have any positions in this stock.