Comcast Corporation - Report Example

Comcast Corporation is a renowned organization which has diversified operations in a range of industries however; the most integral component of the firm’s business activities is rooted in offering services which are associated with mass media and its corresponding markets and industries. According to a report produced by the Institute of Media and Communications Policy, Comcast Corporation presently maintains its position as the world’s leading and largest media conglomerate catering to an extensive clientele that is located across the United States. As stated previously during its four decade old presence in the market, Comcast Corporation’s journey has been marked by an evolution where the company has developed into a firm which manages the operations of several divisions and businesses thereby, contributing the firm’s development into a full-fledged media corporation (Plunkett). However, Comcast Corporation’s amalgamation with NBC Universal which came in the first half of 2011 can be termed as the event which triggered a progression of the company into the realm of mainstream broadcasting and entertainment as it awarded Comcast with the opportunity to hold the ownership of “…two TV networks, twenty-six TV stations, twenty cable channels (and) several production facilities” (Institute of Media and Communications Policy). According to a comprehensive market analysis and market research report developed by IBISWorld on the cable network industry in the United States, the annual revenue figures for the industry stand at $56bn with a growth rate of 1.7% between the 5-year-period lasting between 2009 and 2014 (IBISWorld, Cable Networks in the U.S 2014). The industry dynamics of cable networking suggest that growth potential is expected to be further enhanced in the next five years that is, between 2014 and 2019 because of positive economic factors including a rise in employment levels and higher disposal incomes (IBISWorld, Cable Networks in the U.S 2014). Both these aspects imply that a rise in demand for cable television which is escalated by the availability and integration of technology in the industry such as that of high-definition (HD) channels is likely to contribute towards overall industry growth potential figures. From the perspective of conducting a competitive analysis it can be reported that the future prospects in the cable networking industry are not essentially optimistic for cable operators because the industry has reached a stage of maturity thereby, suggesting that even though an opportunity for growth is still present for media corporations and conglomerates that are involved in the industry, these figures do not correspond with the overall economic growth potential for the same timeframe (IBISWorld, Cable Networks in the U.S 2014). This observation however, favors Comcast Corporation’s industry position which maybe guided with further development in the coming years. In the present scenario Comcast Corporation’s subsidiary NBC Universal owns a substantial market share within the cable networking industry which is superseded by only one company that is 21st Century Fox, other close competitors of the firm include Viacom Inc., The Walt Disney Company and Time Warner (IBISWorld, Cable Networks in the U.S 2014). Comcast Corporation’s participation in the television broadcasting industry is also a consequence of its ownership of NBC Universal. However, unlike the future prospects of cable networking, the television broadcasting industry was marked by a negative annual growth between 2008 and 2013 with a figure of -1.1%, additionally, the industry does not boost of vast revenue collections such as the cable networking industry with annual collections standing at $38bn (IBISWorld, Television Broadcasting in the U.S 2013). Possible decline in TV broadcasting viewership is attributable to the surge of online-based mediums, portals and platforms which offer a wide variety to audience while, catering to a large viewership that prefers a range of genres (IBISWorld, Television Broadcasting in the U.S 2013). Henceforth, technology has played a critical role in the decline of the industry growth potential. NBC Universal, as a part of Comcast Corporation maintains the second largest market share in the industry after Fox and the third place is held by The Walt Disney Company (IBISWorld, Television Broadcasting in the U.S 2013). The management of Comcast Corporation understands that its key or primary businesses encompass NBC Universal and Comcast Cable which are impacted by distinguishable external matters (Comcast Corporation, Form 10-K 2013). In the case of Comcast Cable, the company anticipates a rise in programming expenditures in future years as a potential disadvantage which may in turn be offset by enhancement of operational efficiencies (Comcast Corporation, Form 10-K 2013). However, in the case of NBC Universal and associated divisions, the management recognizes increasing competition as a potential threat owing to the highly customer-oriented nature of the industry (Comcast Corporation, Form 10-K 2013). The company’s 3-year Balance Sheet and Income Statement have been attached on the next page of the report. (Source: Comcast Corporation, Form 10-K 2013) The company’s net income has increased between 2011 and 2013, which is favorable for the company as it indicates that Comcast has been able to reduce expenses and costs and also enhance the level of revenues through a range of operations. The following section of the report focuses on conducting a financial analysis of the firm with a very notable competitor – Time Warner Inc. The table shown below depicts the three year figures for the companies’ current ratio. Current Ratio 2011 2012 2013 Comcast Corporation 0.65 1.2 0.74 Time Warner Inc. 1.51 1.35 1.53 (Source: Wikinvest.com) In comparison with industry benchmarks, the current ratio of Comcast Corporation is 87.79 per cent lesser than that of those organizations which operate in the entertainment and media industry (Macroaxis). Moreover, even in terms of standard guidelines which call for a 2 to 1 current ratio as an acceptable number for a company regardless of industry considerations both Comcast Corporation and Time Warner Inc. have displayed that they are lagging behind. This factor proves that the company has not been able to secure a financially ideal state with respect to this measure of company valuation. Accordingly the table shown below presents the assessment of the quick ratio of Comcast Corporation and Time Warner Inc. for the period between 2011 and 2013. Current Ratio 2011 2012 2013 Comcast Corporation 0.46 1.07 0.62 Time Warner Inc. 1.29 1.14 1.29 (Source: Stock Analysis On) It can be deduced from the figures presented above that Comcast Corporation has been rather inconsistent in maintaining the development and improvement of its quick ratio because despite of the emergence of an improved scenario in 2012, the company failed to capitalize on a positive financial indicator and maintain its run for stability. On the contrary, Time Warner Inc.’s bid to acquire financial stability by avoiding volatility has been quite successful in the period between 2011 and 2013 which is a positive sign for the firm. The table which has been presented below shows the cash ratio for Comcast Corporation and its key competitor Time Warner Inc. Cash Ratio 2011 2012 2013 Comcast Corporation 0.13 0.74 0.28 Time Warner Inc. 3.57 3.05 0.51 (Source: Stock Analysis On) Comcast Corporation’s possession of cash and other short-term assets as a figure which is comparable to the ownership of the company’s current liabilities has been characterized by an enhancement in the period between 2011 and 2012 however, the company has failed to maintain this momentum thereby, losing this measure of financial stability in 2013 as compared to the preceding year however, the figures for Time Warner Inc. have also been hit by a serious decline in 2013 possibly because of the greater utilization of cash or an enhancement in short term liabilities such as short term bank loans or credit purchases to serve corporate objectives. In terms of maintaining their short-term operations and enhancing the efficiency of their operations the companies maintained the following ratios: Comcast Corporation 2011 2012 2013 Inventory Turnover N/A N/A N/A Receivables Turnover 12.83 11.33 10.14 Time Warner Inc. Inventory Turnover 8.63 7.73 8.00 Receivables Turnover 4.19 3.89 3.79 (Source: Stock Analysis On) The company’s receivable turnover rate has declined in comparison with the last three years however; it is still higher than the recievables turnover rate for the rival firm, Time Warner Inc. The company should continue to maintain its level of effective liquidity and asset management to enhance overall business efficiency and remain competitive. The diagram shown below presents the 3-year profitability analysis for the firms. Comcast Corporation 2011 2012 2013 Net Margin 8.56% 9.53% 11.63% Operating Margin 19.43% 21.08% 21.11% P/E Ratio 17.38 16.98 16.99 Time Warner Inc. Net Margin 9.43% 14.27% 11.48% Operating Margin 19.44% 23.31% 20.39% P/E Ratio 15.34 13.35 18.15 (Source: Wikinvest.com) The description of the companies’ profitability ratios can be seen as being somewhat consistent because the firms have been able to receive satisfactory results over a course of 3 years despite of the impact of external forces and occurrences in the economic environment on the prospects of firms’ revenue and profit generation ability. However, as reported in Comcast Company’s Form 10-K 2013, it can be expected that the organization would face a surge in costs because of programming expenditures to cater to a large clientele which may impact the company’s ability to generate greater profits unless costs are reduced through the implementation of management measures to enhance operational efficiency. Similarly, Comcast’s price earnings ratio has been declining and is also lower than that of Time Warner Inc. this can be labeled as an unfavorable sign for attracting further investment in the company. Accordingly the debt to equity ratio for the firms is as follows. Debt to Equity Ratio 2011 2012 2013 Comcast Corporation 2.34 2.34 2.13 Time Warner Inc. 1.26 1.29 1.27 (Source: Wikinvest.com) Comcast Corporation’s consistently high debt to equity ratio in comparison with that of Time Warner Inc. sheds light towards the observation that the company has been indulging in expansion activities in the past few years by diversifying its business and looking for new prospects because of the probability that some industries such as television broadcasting with which it is associated may come into decline as a consequence of both economic and technological factors such as the introduction and subsequent spread of online platforms or sources of entertainment. Owing to this view Comcast Corporation has engaged in the purchase of new divisions and segments such as sports facilities and theme parks that may have been financed via debt. However, at this point the company must remain cautious to only diversify and invest in profitable ventures because it cannot afford to maintain a high debt equity ratio with the possibility of lower returns in the future as it could lead to alarming problems and issues. At this stage it is highly recommended for the firm to raise equity through the selling of shares rather than giving preference to debt financing measures. Moreover, it must also be stated that despite of share price fluctuations in the prior year ranging between 47.00 and 53.00 the company has been consistently delivering a positive earnings per share for investors for the last decade (Yahoo Finance). This factor can be termed as a highly desirable aspect of the company especially from the perspective of investing into the organization. However, given the industry dynamics for cable networking and TV broadcasting, the two primary components of Comcast Corporation’s operations, an unfavorable liquidity and long term debt paying ability situation and the news of a possibility of a merger between the company and Time Warner Cable that is being opposed heavily by consumer groups due to legitimate fears of monopolization (Crawford), a 10,000 share purchase of Comcast Corporation’s stock cannot be deemed as desirable or favorable in the present scenario. Works Cited Comcast Corporation, Form 10-K 2013. Accessed from [13th April 2014] Crawford, Susan. Here’s Why the Comcast-Time Warner Merger is Bad. MIT Technology Review. 2014. Accessed from [13th April 2014] IBISWorld. Cable Networks in the U.S 2014. Accessed from [13th April 2014] IBISWorld. Television Broadcasting in the U.S 2014. Accessed from [13th April 2014] Institute of Media and Communications Policy. Comcast Corporation. Institute of Media and Communications Policy. Accessed from [13th April 2014] Plunkett, Jack W. Plunketts Entertainment & Media Industry Almanac 2009: The Only Comprehensive Guide to the Entertainment & Media Industry. Houston, Tex: Plunkett Research, 2009. Print. Stock Analysis On. Time Warner Inc. Stock Analysis On. 2014. Accessed from [13th April 2014] Wikinvest. Comcast Corporation. Wikinvest. 2014. Accessed from [13th April, 2014] Yahoo Finance. Comcast Corporation. Yahoo. 2014. Accessed from [13th April 2014] Read More