It is one thing to buy a value stock, or a company with a very low multiple that is trading below historical multiple levels. It’s quite another thing to buy a compelling value stock, because that is one in which value can be unlocked by earnings gains, a change in the macro environment or a headline event like a takeover or merger proposal. Those are companies that savvy experienced investors look for in frothy and potentially volatile markets.
In a new Jefferies research report, the analysts circle in on stocks they feel are compelling values for investors now. We like three of the companies, and all are rated Buy at Jefferies.
This large cap broadcaster has bounced nicely off the lows and still could be an incredible value. CBS Corp. (NYSE: CBS) may be in the best position of all the broadcast networks with an outstanding prime time lineup, solid sports franchises like the NFL, March Madness College Basketball, The Masters and other top programming, the venerable network could once again be an outstanding stock for shareholders.
The company is leading in the spring ratings, and is poised to continue the network’s programming dominance in 2016. The broadcasting giant is now in the midst of a significant stock repurchase process, and many on Wall Street expect the company to shrink its share base by around 25% over the next two years.
Network advertising and strong content licensing revenue drove the upside in the third-quarter earnings, which beat consensus estimates despite a slight revenue miss. Similar to the broadcasting giant’s rivals, many analysts expect CBS to look to book content licensing more evenly over this year and into 2017.
The Jefferies team sees the company as a big winner as viewership changes and cord cutting start to affect viewership. In fact they see a 10 million subscriber decline by 2015, and they believe that CBS remains a winner as re-transmission rates will continue to climb and offset the subscriber declines, especially at strong broadcast networks like CBS.
CBS shareholders are paid a 1.13% dividend. The Jefferies price target for the stock is $62. The Thomson/First Call consensus price target is set at $63. Shares closed most recently at $53.93.