Comcast’s past looks brighter than future

Dear Mr. Berko: I think I would like to buy 50 shares of Comcast, which trades for $14.77 a share. Please tell me what you think of this company and if you think it’s a good investment. And please tell me why you switched your e-mail from Comcast to Yahoo and Gmail.

P.R., Boca Raton, FL

Dear P.R.: Comcast’s (CMCSK-$15.55) book value has nearly doubled in the past 10 years from $8.19 a share in 1999 to $15 a share this year. Revenues grew sixfold from $6 billion to almost $36 billion in 2009.

Net profit margins, which were 4.2 percent, doubled to 8.4 percent; operating margins improved 31 percent; return on equity doubled to 6.7 percent while return on capital almost tripled to 7.0 percent. And just last year, the board instituted its first dividend of 25 cents a share. And that record is not unimpressive.

CMCSK has 25 million TV subscribers in 39 states; its Internet service has 15 million customers; and its phone service adds another 6.4 million people to CMCSK’s billing list. However, net gains from video revenues and cable subscribers during the past six months have been a bit disappointing and longer-term concerns about the nature of its TV business are reflected in CMCSK’s low P/E ratio of 13 times forward earnings, which suggests that its past double-digit growth is now over. Certainly, a recessionary environment is one factor contributing to fewer subscribers, but I believe this trend is due to Comcast’s mature customer base.

I doubt that CMCSK can successfully grow its phone business because it must go head to head with Verizon,

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