Finding the Best Value in a Former Growth Trend

One of the best growth trends of the last decade was in streaming services. Starting as an ancillary platform for viewing shows online, a number of companies embraced the model.

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  • Many even started producing their own original content, and now top streaming companies are having their original productions nominated for –and winning—Oscars. But since Netflix (NFLX) proved it was a viable model, other media companies scrambled to create their own services leading to competition and slower growth.

    With the big growth gone, investors today should look for value among the media company players, especially as analysts remain dour about the former growth plays. That way, they can get that slower level of growth at a reasonable price, and also benefit from the power of owning a content creation and delivery platform.

    Among the players today, Paramount Global (PARA) looks like the best value play. Formerly ViacomCBS, the platform owns some top franchises. More importantly, shares are down nearly 15 percent over the past year, even as earnings have grown 154 percent.

    Action to take: Trading at just over 5 times earnings right now, shares look cheap, especially compared to peers. And shares yield just over 2.5 percent. Although the dividend hasn’t been raised in the last year, the low payout ratio of about 15 percent leaves room for an increased yield in the future.

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  • For traders, shares have started to trend up in recent weeks. The June $45 calls, last going for about $1.15, can likely return high double-digit returns in the coming weeks on a continued uptrend.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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