Comcast Corporation ($CMCSA) is a US cable company. At 31 December 2007 the company had approximately 24.1 million video subscribers, 13.2 million Internet subscribers and 4.6 million phone subscribers. The stock has dropped nearly 30% this year. How does the current share price look from an intrinsic value perspective?

Valuecruncher valuation model of $CMCSA with interactive assumptions

Valuecruncher produces a valuation of US$23.70 for $CMCSA. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 50.4% above the current share price of US$15.76. $CMCSA appears to be trading well below our estimate of intrinsic value - with what we believe to be conservative assumptions.

Assumptions

• Revenue: Reuters aggregates 17 analysts covering $CMCSA and these analysts have mean estimates of 2008 and 2009 revenues of US$34.4 billion and US$37.1 billion respectively. For our analysis we have used US$34.0 billion in 2008, US$36.0 billion in 2009 and US$38.0 billion in 2010.
• Profitability: We have used an EBITDA margin of 37.0% to 2010. Reuters has $CMCSA‘s EBITD margin at 38.3% last year and averaging 37.4% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of US$6.25 billion per annum moving forward.
• Discount Rate: 8.5%. You could make an argument for a discount rate anywhere in the 8-9% range.
• Terminal Growth Rate: 3.0%. The US economy grew at an average of 3.6% over the last five-years.

Our analysis incorporates the cash and debt the $CMCSA balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None