While the market focuses on streaming, nothing pulls a crowd like live TV, especially sports. When tens of millions of people tune in at the exact same moment, advertisers will pay handsomely to be in the room.

However, this best-in-class broadcaster’s stock price still doesn’t reflect the strength of its underlying business.

As a result, this week’s Long Idea remains undervalued with strong upside potential.

Below, we provide an excerpt from our latest Long Idea report. Get the full report a la carte here.

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This stock presents quality Risk/Reward based on the company’s:

  • reign atop the TV market,
  • multi-year live TV rights,
  • differentiated brands that reach all demographics,
  • growing digital and streaming distribution,
  • strong revenue growth and leading profitability,
  • significant shareholder return, and
  • cheap stock valuation.

Growth Across the Business

This company continues to grow its two main segments: cable network programming and television.

Cable network programming revenue has grown 5% compounded annually from fiscal 2018 to fiscal 2026.

Television revenue has grown 8% compounded annually over the same time. See Figure 1 from the full report.

Figure 1: Operating Segment Revenue: Fiscal 2018 – Fiscal 2026

Sources: New Constructs, LLC and company filings

Improving Fundamentals

The company has grown revenue and net operating profit after-tax (NOPAT) by 6% and 5% compounded annually since fiscal 2021, respectively.

The company’s NOPAT margin fell slightly from 16.0% in fiscal 2021 to 15.5% in fiscal 2026, while invested capital turns rose from 1.1 to 1.3 over the same time. Rising IC turns offset the drop in NOPAT margin and drive the company’s return on invested capital (ROIC) from 18% in fiscal 2021 to 20% in fiscal 2026.

Additionally, the company’s Core Earnings, a superior measure of earnings, have grown 7% compounded annually since fiscal 2021.

Strong Cash Flow Supports Capital Return

Investors can take comfort in knowing the company can afford to continue to pay its dividends and repurchase shares based on its large free cash flow (FCF). From fiscal 2021 through fiscal 2026, the company generated $10.5 billion in FCF, which equals 33% of the company’s enterprise value. See Figure 4.

The company’s $10.5 billion in FCF since fiscal 2021 is more than enough to cover its $9.8 billion in combined dividend payments ($1.8 billion) and share repurchases ($8.0 billion).

Figure 4: Cumulative FCF: Fiscal 2021 – Fiscal 2026

Sources: New Constructs, LLC and company filings

…there’s much more in the full report. You can buy the report a la carte here.

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