CBS’ (NYSE:CBS) is a diversified media company that primarily competes with other media conglomerates like Disney (NYSE:DIS), News Corp. (NASDAQ:NWS), Time Warner (NYSE:TWX) and Viacom (NYSE:VIA). Below we take a quick look at the most critical drivers of CBS’ stock value.
Our price estimate for CBS stands at $27.49, implying a premium to market price.
CBS-Owned TV Stations and CBS Radio – 28% of CBS’ Stock Value
CBS-owned TV stations and CBS Radio together contribute about 28% to CBS’ stock value, making this segment the top value driver for the company by our estimates. The substantial value comes from a combination of significant revenue and healthy margins.
CBS owns broadcasting TV stations through its CBS Television Stations group which offers programming from CBS Network, CW Network and MyNetworkTV. In addition to this, the company owns 130 radio stations. Although combined advertisement revenues attributable to these TV stations and CBS radio amount to close to 20% of overall CBS revenues, higher valuation of this segment is due to its higher EBITDA margins. The EBITDA margins for this segment stood at around 31% in 2010. These are much higher than that of CBS Network revenues, for which margins were just around 12% for the same period. Although cable networks have higher margins, their revenue contribution is still much less compared to CBS-owned TV stations and CBS radio.
