Check Out The Varying Levels Of Debt Among These Television Providers
The big television studios are likely a bit perturbed as today's announcement of the Emmy nominations has put tech companies back into the news. Though Netflix's (NFLX) nods from the committe might seem modest at 14 when compared to other industry giants such as HBO (108), it does represent the first time that content from an online platform is being allowed to compete with offerings from conventional television.
The announcement has increased speculation about what television will look like in a few years. How will we watch it, what will the interface be, and - perhaps most importantly - what will funding arrangements look like in an age with no commercials?
Apple (AAPL) is frantically building apps for different content channels, such as HBO and ESPN, striving to collaborate with the companies already in the industry as opposed to competing with it directly. Another technology titan, Google (GOOG), is taking a different approach - reaching out for channel licenses in a bid that would make them the first Internet cable service to compete directly with the likes of Comcast and Time Warner.
The industry is obviously poised for an enormous shift. The television set, once a fixture of everyone's living rooms, is becoming increasingly irrelevant, with zero-TV households doubling between 2007 and 2013 - a trend that will likely accelerate once more (legal) content options are available online. Which isn't to say that millennials will be streaming The Simpsons on their laptop a decade, or even a few years, from now. However, it is a time when a number of companies are taking huge risks to either gain, or refrain from losing a competitive edge.
So how do these changes in television affect investors? One of the ways to assess the risk associated with a stock operating in this space is by looking at its Debt to Equity ratio, which calculates the total liabilities divided by a stockholders equity. A high ratio means more debt, which can make a company more volatile. If the cost of financing the debt outweighs the returns, then a company is in serious trouble. However a company can also make new investments that it might not been able to afford with shareholder financing alone. We looked at five media companies to try and get a sense of who is borrowing the most, and what analysts are saying about them.
CTC Media (CTCM), Russia's leading independent media company has a debt to equity ratio so low (<0.01), that it wouldn't even appear on our chart. Liberty Media (LMCA) isn't borrowing much money either. Netflix, CBS Corporation (CBS), and Scripps Network (SNI) are all much more heavily leveraged, with debt ratios between 35 and 45%.
Dig Deeper: Compare analyst ratings for the companies mentioned.
For an interactive version of this chart, click on the image below. Data sourced from Zacks Investment Research.
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���Do you see investment opportunities in these television providers? Use this list as a starting point for your own analysis.
1.Liberty Capital Group (LMCA):Engages in a range of media, communications, and entertainment businesses. Market cap at $16.44B, most recent closing price at $138.12.