Critical Comparison: Time Warner (TWX) and The Competition

Time Warner (NYSE: TWX) is one of 32 public companies in the “Cable & other pay television services” industry, but how does it contrast to its peers? We will compare Time Warner to similar companies based on the strength of its valuation, earnings, analyst recommendations, institutional ownership, profitability, dividends and risk.

Risk and Volatility

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Time Warner has a beta of 0.87, meaning that its stock price is 13% less volatile than the S&P 500. Comparatively, Time Warner’s peers have a beta of 1.22, meaning that their average stock price is 22% more volatile than the S&P 500.



Dividends

Time Warner pays an annual dividend of $1.61 per share and has a dividend yield of 1.7%. Time Warner pays out 25.1% of its earnings in the form of a dividend. As a group, “Cable & other pay television services” companies pay a dividend yield of 1.5% and pay out 34.0% of their earnings in the form of a dividend. Time Warner is clearly a better dividend stock than its peers, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Time Warner and its peers top-line revenue, earnings per share and valuation.

Gross Revenue Net Income Price/Earnings Ratio
Time Warner $31.27 billion $5.25 billion 15.01
Time Warner Competitors $12.86 billion $1.94 billion 56.66

Time Warner has higher revenue and earnings than its peers. Time Warner is trading at a lower price-to-earnings ratio than its peers, indicating that it is currently more affordable than other companies in its industry.

Profitability

This table compares Time Warner and its peers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Time Warner 16.78% 18.96% 7.54%
Time Warner Competitors 1,300.32% 29.22% 4.80%

Institutional and Insider Ownership

80.9% of Time Warner shares are held by institutional investors. Comparatively, 54.4% of shares of all “Cable & other pay television services” companies are held by institutional investors. 0.2% of Time Warner shares are held by insiders. Comparatively, 11.4% of shares of all “Cable & other pay television services” companies are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and recommmendations for Time Warner and its peers, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Time Warner 0 14 9 0 2.39
Time Warner Competitors 298 1482 2281 75 2.52

Time Warner presently has a consensus target price of $104.38, indicating a potential upside of 8.32%. As a group, “Cable & other pay television services” companies have a potential upside of 22.97%. Given Time Warner’s peers stronger consensus rating and higher probable upside, analysts plainly believe Time Warner has less favorable growth aspects than its peers.

Summary

Time Warner peers beat Time Warner on 9 of the 15 factors compared.

About Time Warner

Time Warner Inc. operates as a media and entertainment company in the United States and internationally. It operates through three segments: Turner, Home Box Office, and Warner Bros. The Turner segment creates and programs branded news, entertainment, sports, and kids multi-platform content for consumers. It operates approximately 175 channels in 200 countries and territories. The Turner segment's networks and related businesses and brands include TNT, TBS, Adult Swim, truTV, Turner Classic Movies, Turner Sports, Bleacher Report, Cartoon Network, Boomerang, CNN, HLN, and iStreamPlanet; and digital properties comprise tntdrama.com, TBS.com, adultswim.com, and cartoonnetwork.com, as well as NBA.com, the NBA League Pass property, NCAA.com, the NCAA March Madness Live app, and PGA.com. It also licenses its original programming, and its brands and characters for consumer products and other business ventures. The Home Box Office segment provides premium pay and basic tier television, and video content services comprising HBO and Cinemax; operates HBO NOW, a video content service; and sells original programming through physical and digital formats, as well as licenses original programming through international television networks and video content services. As of December 31, 2017, this segment had 54 million domestic subscribers. The Warner Bros. segment produces, distributes, and licenses television programming and feature films; distributes digital and physical home entertainment products; and produces and distributes games, as well as licenses consumer products and brands. Time Warner Inc. serves cable system operators, satellite service distributors, telephone companies, and virtual multichannel video programming distributors, as well as digital distributors. The company was formerly known as AOL Time Warner, Inc. and changed its name to Time Warner Inc. in 2003. Time Warner Inc. was founded in 1985 and is headquartered in New York, New York.

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