But although the media giant’s core business has been performing well of late, this dramatic increase in share price is almost entirely thanks to the three-way bidding war for Sky that was initiated by Rupert Murdoch’s 21^st Century Fox and has now embroiled Disney and Comcast.

The latest twist in this long-running saga has been Comcast’s improved offer of 1,475p per share tabled earlier this month that would value the whole of Sky at £26bn – or a rather full-looking 12 times full-year 2017 EBITDA. But what does this mean for current and prospective shareholders?

For current shareholders, there’s little downside to holding their shares as they currently trade at just a 4% premium to Comcast’s latest bid. Considering Disney’s apparent willingness to engage in a bidding war for a ready-made pipeline for distributing its content to European households, I wouldn’t rule out another offer. But at the same time, with a full valuation and no guarantee of further bids, more conservative investors may want to take their profits and run.

Indeed, as a non-shareholder, I can’t say Sky’s current price appeals to me. Comcast’s latest bid values the company quite highly so buying its shares right now is pretty much nothing more than a bet on further bids being made for the business. In the end, Disney-backed Fox may decide to improve its latest offer, but as a long-term investor focused on buying great companies at attractive prices, not betting on M&A activity, I can’t say I find Sky a tempting target right now.

An under-the-radar income star 

One telecom whose shares haven’t been enjoying a bumper run-up like Sky’s, is Isle of Man-based Manx Telecom (LSE: MANX). Manx, which is the island’s largest fixed line operator, has seen its share price fall back 14% over the past year.

This puts the company’s valuation at just 11.6 times forward earnings while offering investors a whopping 8.8% dividend yield. This valuation and well-covered dividend payout alongside decent opportunities for earnings growth make the company an interesting investment opportunity in my eyes.

Firstly, the company’s competitive position on the Isle of Man puts it in a great position as the island is small enough not to attract large competitors, but also large enough to sustain healthy profits after investment for Manx. Last year, the company’s generated underlying EBITDA of £27.1m off of £78.5m in revenue, which allowed it to both invest in future growth opportunities and increase its dividend payout while leaving net debt at a healthy 2.1 times EBITDA.

These growth opportunities centre around domestic-focused activities such as providing faster, and pricier for the customer, internet connections and providing data centres for businesses, as well as international growth opportunities such as its agreement with Chinese behemoth Unicom to provide UK roaming services for its customers. These expansion opportunities are unlikely to lead to rapid growth. But I reckon they offer the possibility of sustainable growth over the long term that should fund both investments in the business and increased payouts for shareholders – more than enough reason for me to consider Manx Telecom as a buy-and-hold income option. 

The post How Sky’s share price jumped 50% in the first half of 2018 appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Walt Disney. The Motley Fool UK has recommended Manx Telecom. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

We’re talking about Sky (LSE: SKY), and the long-running takeover saga has taken a further step after Rupert Murdoch’s 21st Century Fox raised its offer to value the company at £24.5bn. The bid trumps Comcast’s previous valuation of £22bn, which itself eclipsed Mr Murdoch’s original offer.

Ofcom and the Competition Markets Authority have been investigating the affair since the original bid, fearful that it could leave Rupert Murdoch with too much control over the UK’s media. But with an agreement for him to sell Sky News (probably to Disney), objections are almost certain to be lifted — and approval for the latest takeover offer is expected to be given very soon.

If it goes ahead, Fox will fork out £14.7bn for the 61% of Sky that it does not already own, and that looks like good news for the folk who own those shares. But the effective valuation of £14 per share is still slightly below the current market price of £15.12, so some investors at least will be hoping for a further escalation of the battle.

Even as it stands, Sky shareholders have seen the value of their investment climb by 72% over the past two years, while the FTSE 100 has gained just 13%. Clearly a terrific result, but is there a valid strategy here for buying in the hope of a takeover?

Takeover strategy

Well, if there is, it’s surely a risky one. It’s not that long ago that Vodafone was seen as a tasty takeover target as rumours abounded, and global consolidation in the telecoms business was seen as inevitable by great swathes of investment professionals.

But nothing has yet come to pass, and Vodafone shares have suffered over the past five years — from a high in February 2014, we’ve seen a 40% fall to today’s 25p level.

That reminds me of a firm rule I have — I would never buy a stock in the hope of a takeover unless I’d buy it at the same price on its own merits alone. In the case of Vodafone, I saw the shares as overvalued, so I kept away.

That’s unlike Imperial Brands, which fellow Fool writer Ian Pierce has highlighted as a possible FTSE 100 takeover target. Imperial Brands shares have been falling since mid-2016, and we’re now looking at a forward P/E of under 11 with a decently covered forecast dividend yield of 6.6%. Now that looks like an attractive valuation to me, and it’s a stock I’d seriously consider buying in its own right — and if a takeover bid should provide an extra boost, that would be a bonus.

More to come?

But back to Sky. In January I rated it as an attractive buy candidate, based on its fundamental valuation and its position as a leader in its market. Not a screamingly cheap investment, but in the words of Warren Buffett, I saw a great company at a fair price.

At the current share price we’re looking at a forward P/E of above 22, while dividends look set to yield 2.5%. That’s a significantly higher valuation today, and it would put me off now. But if the bidding is not yet over, there could still be more twists…

The post What can investors learn about the Sky takeover saga? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Walt Disney. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The problem is, while earnings rose for the first few years as a result, the year to March 2016 saw only a 1% EPS rise, followed by a 9% drop last year. And forecasts suggest flat overall EPS figures between now and 2020.

Did BT overpay for those sports rights and overstretch itself ? It’s very possible it did, and the company is shouldering a hefty debt pile at the moment — net debt stood at £9.5bn at the first-half stage at 30 September.

While that’s a slight reduction, it’s above annualised EBIDTA of £6.4bn (based on first-half figures) by a multiple of 1.5 times. For many companies, that wouldn’t be any problem at all, but BT is also facing a massive pension fund deficit of £14bn — and that’s growing rather than shrinking.

Second worst

In fact, as recently as November 2017, index provider MSCI rated BT’s as the second-worst funded pension scheme in the world, and gave it a crisis rating. And on Thursday we learned that the pension fund’s chief executive is to quit.

At around 260p the shares are on a forward P/E multiple of only 9.5, which might look attractive. But it’s misleading. BT’s current market cap stands at £26bn, but a total of £21bn is effectively owed to lenders and to the pension fund.

Something is surely going to have to change on the cashflow front, and I can’t help seeing a lot of pressure on BT’s over-generous dividend payments. Forecast yields of over 6% just don’t look sustainable.

Sector leader

It’s hard to see Sky (LSE: SKY) as being anything but a leader of the televisual content delivery business, and it’s been in the news for a few reasons this week.

The biggest is the block by the Competition and Markets Authority of 21st Century Fox‘s takeover attempt. The strengthened influence of the Murdoch family would, the CMA says, cause too many media plurality concerns.

Things could change due to Disney’s acquisition plan for Fox, but for now Sky survives as a separate company, and I reckon it’s a good one for investors.

The other big news was Sky’s impressive first-half figures, which include a 5% rise in like-for-like revenue to £6.7bn, a 10% boost in EBITDA to £1.1bn, an 11% increase in EPS and a 4% hike to the interim dividend.

There’s debt

Sky does carry some debt, to the tune of £7.4bn at 31 December. That’s less than BT’s £9.5bn, though it’s a greater proportion of the firm’s market cap, which stands at approximately £18bn. And it’s more than three times estimated annualised EBITDA, which is a cause for concern for me.

But Sky’s big financial advantage over BT is the absence of a large pension deficit. And with earnings predicted to continue growing strongly, the current level of debt looks supportable — although I would like to see some reduction in the medium term.

One final bit of news is that Sky is set to ditch its focus on its trademark satellite dishes and offer content online in a bigger way, and that’s something that should cut costs.

On a forward P/E of around 14, I see Sky’s 1,023p shares as attractively valued. And it could even be a tasty takeover target for someone.

The post Here’s why I’d buy Sky plc ahead of BT Group plc for 2018 appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

For Mr Murdoch, the news was mixed as the CMA ruled he would have too much control over the UK’s news industry were he to gain full control over the broadcaster. Although this isn’t the end of the world as there are ways to solve this before culture minister Matt Hancock makes the final decision by May 1^st, it does throw up some roadblocks.  

However, the group’s impressive H1 results mean that even if this deal doesn’t go through, it wouldn’t be surprising to see rumoured interest from US media giants Comcast and Viacom turn into firm offers. A big part of their interest is due to dramatic consumer consumption habits that have stung traditional TV broadcasters but have also made them tempting targets for vertically integrated media firms such as Comcast and Viacom.

To this end, the fact that Sky added 365,000 customers across Europe during the half year will be particularly pleasing as its these eyeballs media firms are targeting. And then there’s the added fact that Sky is actually performing quite well. In H1, the firm’s like-for-like revenue rose 5% year-on-year, while increased operating efficiencies boosted EBITDA by a full 10%.  

That said, Sky’s current valuation of £17.6bn, or over 25 times earnings, means the group’s takeover potential is pretty firmly baked into the share price. For would-be investors that means I see little upside in jumping in and buying its shares right now.

Is this year finally the year? 

A more undervalued takeover target is tobacco giant Imperial Brands (LSE: IMB). The group seems to be a perennial favourite for takeover rumours due to lower profitability than peers such as British American Tobacco, relative lack of scale in some markets, and lack of a compelling next generation heat-only vaping device.

But with its share price down 20% over the past year and its valuation at a steep discount to its larger UK-listed rival, Imperial may be looking more attractive to would-be suitors. At the top of the list if Japan Tobacco, who could use Imperial as a rapid way to gain exposure to markets in the Middle East and North Africa, which would lessen its own reliance on highly-regulated Japanese and European markets.

This persistent rumour was boosted in November when Japan Tobacco named a new CEO who has experience overseas, oversaw large acquisitions in his previous posts, came right out and said in an early interview with Reuters that he wanted to expand overseas through acquisition, and that the size of any such deal wasn’t a problem.

With Imperial’s valuation down to 19.8 times earnings while kicking off a 5.8% dividend yield, now is an interesting time to take a closer look at the business. But I still see plenty more to like about its much more profitable and faster-growing rival, British American.  

The post Why Sky plc and Imperial Brands plc are top FTSE 100 takeover targets for 2018 appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Specifically, the CMA report declares: “Our view is that although the MFT [Murdoch Family Trust] will not have full ownership of Sky following the transaction, the significantly increased control it will be able to exercise over Sky and Sky News is sufficient to give rise to concerns that, as a result of the transaction, there could be increased editorial alignment of Sky News and the newspapers owned by News Corp.”

However, while the regulator is recommending that the deal should be blocked in its current form, it does say that it could go ahead with a spin-off or divestiture of the Sky News operation “to insulate Sky News from the Murdoch Family Trust’s influence.”

But the CMA’s statement also acknowledges that Fox is in the process of selling itself to Disney in a $52.4bn deal agreed last year. This deal includes Fox’s stake in Sky. And if this merger is given the green light by US regulators, the CMA acknowledges that the concerns around plurality could “fall away.”  

Put simply, as everything stands today, it’s unlikely Fox will be allowed to acquire the 61% of Sky that it does not already own (the deadline for the CMA’s final report to the Secretary of State is 1 May 2018). 

What’s next for investors? 

So, what does this mean for shareholders? I think it could be good news. 

Sky is a highly profitable and growing business. At the end of this week, the company is slated to report its earnings for the six months ended 31 December 2017 and analysts are expecting pre-tax profit growth of 10%. For full-year 2018, earnings per share growth of 28% is projected, followed by an increase of 10% for 2019. If the merger stalls the group is also set to restart dividends with analysts estimating a yield of 3.5% on offer. Further, when the deal was announced, shareholders were promised a 10p per share special dividend if it fell apart. 

Overall then, as a standalone business, Sky is growing and blocking Fox’s bid is unlikely to slow growth. What’s more, it’s highly likely that if the Disney/Fox deal goes ahead, at some point in the future Disney will make an offer for the rest of Sky If the UK-based media group continues to grow earnings at a rate of 10% or more per annum, to convince shareholders to sell, Disney will have to make an offer that’s greater than Murdoch’s 1,075p per share price. 

All in all, even though the CMA’s recommendation is disappointing, over the next week, I’m going to be buying more Sky for my retirement portfolio. The business continues to expand, and at some point, I believe either Disney or Fox will make another attempt to absorb the company at an improved price. 

The post Why I’m buying more Sky plc after CMA blocks Fox bid appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Sky Plc. The Motley Fool UK owns shares of and has recommended Walt Disney. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The group’s financial performance has only deteriorated since then — pre-tax profits fell by more than 40% during the firm’s first quarter after it was forced to pay out £225m to Deutsche Telekom and Orange, to avoid legal action related to its Italian accounting scandal and its purchase of EE.

Overall revenues climbed by just 1% to £5.8bn, as growth slowed on the consumer side and wholesale revenues continued to shrink.

Dividend risk?

Looking ahead, there are growing concerns about the sustainability of BT’s dividend policy as capital expenditure is being ramped up. BT has pledged to spend billions over the next few years on upgrading its Openreach and EE networks. At a time when its revenues are coming under increasing pressure from its rivals and margins are being squeezed by the spiralling cost of sports rights, this would likely crimp cash available for dividends.

Shares reached a new 52-week low yesterday and are now trading at just 9.8 times forward earnings. With such a low valuation multiple, it is apparent that investors are concerned about the additional possible downside in the months to come.

A better buy?

Meanwhile, I reckon that Sky (LSE: SKY) could be a safer buy for investors looking for a FTSE 100 pick.

Fundamentals are still going strong for the satellite broadcaster, following an upbeat trading update this morning. Like-for-like revenue increased 5% to £3.3bn in the three months to 30 September, as it delivered another strong quarter for customer growth. Some 160,000 new customers joined the company in the first quarter — a 51% increase on the same period last year, reflecting the success of its airing of Game of Thrones and original commission drama Riviera.

Fox’s offer of £10.75 per share

Shares in Sky are up 2% today, but they’re trading at a 14% discount to Rupert Murdoch’s 21st Century Fox offer price of £10.75. And that’s before we take into account the 10p per share special dividend which shareholders would get if the deal is completed after 31 December 2017.

Although the acquisition is far from a done deal as Murdoch’s £11.7bn Sky takeover bid is referred to Competition and Markets Authority, I think its shares are still an attractive arbitrage opportunity as the downside risk seems limited. Sky’s underlying financial performance is improving and valuations seem undemanding, with shares in the company trading at 14.4 times this year’s expected earnings.

What’s more, if the deal falls through because of a failure to clear regulatory hurdles by 15 August 2018, Fox would have to pay a £200m break fee to Sky. This could potentially lead to a windfall payment to Sky’s shareholders, which would reduce the downside impact of the deal falling through.

The post One FTSE 100 stock I’d buy ahead of BT Group plc appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This lean business model has allowed it to undercut the competition by a devilish amount. Usually, when estate agents helps sell your property they will take a percentage fee. Purplebricks has discarded this approach in favour of a flat rate for any property, regardless of value. For only £849, the seller gets a local agent, listings on all major websites like Rightmove and access to one of the UK’s largest databases of buyers.

Its competitive advantage stems from its ‘first mover’ status, but I’m not sure it is durable. You see, a lot of companies that create superior processes go on to earn superior returns. Inevitably, these outsized returns attract competitors to the industry, driving down profitability for everyone involved.

Have you heard of Hatched, House Simple, House Network, My Online Estate Agent, Settled, Tipilo or Yopa? 

Well, if you’re an investor in Purplebricks you probably should have done, because according to Which? they all provide similar services. Here’s the comparison page.

Oh, and that last one, Yopa, was launched by upmarket estate agent Savills. If you thought the industry would just lie down and die, you were wrong. I don’t enjoy deterring investors from genuinely interesting and useful businesses, but I worry that this business model is not patentable or protectable.

The company’s best chance at domination, however, is the network effect. This describes any network that becomes more valuable as more people join it. Purplebricks’ network of buyers using the app could represent a durable advantage if it can reach critical mass before competitors do. But it must do this before a rival with financial firepower turns up and makes this a harder race.


If the network falls behind that of competitors, the brand will not protect sales and I believe Purplebricks will experience an incredible hotting-up of competition in the future. At the end of the day, people will flock to the platform that has the most economic benefits.

Brands are overrated

Sky (LSE: SKY) is a good example of this in another sector. The internet has opened up the television industry to a myriad of new competitors, not least among them Amazon Video and Netflix. The battle for content is hotting up – and that means Sky will likely have to spend more to keep its services appealing to its customers.

The company has long relied on expensive sports rights to drive business, but these rights are up for auction every few years, meaning the future is hard to predict. Competitor BT secured the Champions League rights back in March, but it cost it £1.18bn – nearly £300m more than it paid last time around. This spending only lasts until 2021, when the bidding begins anew and Sky faces the same issue. 

Sky’s churn rate increased more than a full percent last year from 10.2% to 11.6%. Admittedly this is still a very low rate, but I believe it to be symptomatic of younger generations avoiding costly bundled deals offered in favour of all-inclusive offerings from Netflix at less than £10 a month.

I reckon Sky will flourish for some time yet, but it must evolve if it wants to stay relevant in the long term.  

The post These two “competitive advantages” could be about to crumble appeared first on The Twelfth Magpie.

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Zach Coffell has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Return to growth

Over the last year and despite “market headwinds”, Sky saw a 10% increase in revenue to just under £13bn compared to the previous year (5% once exchange rate fluctuations are eliminated).

As expected, earnings were impacted by the sizeable costs incurred in buying the rights to show Premier League football and investment in new business, with overall operating profit falling 6% to £1.47bn. Positively, this blow was cushioned by an 8% rise in Q4 to £455m. Earnings per share also rose 19% in the most recent quarter.

In addition to launching Sky Q — its next generation TV platform — in over 1m homes in the UK, the company also reported strong demand in Germany, Austria, and Italy. Over the 2016/17 financial year, Sky welcomed 686,000 new customers, bringing the total number of people consuming its content to 22.5m.

Looking forward, CEO Jeremy Darroch revealed what he labelled as a “strong set of growth plans” for the new financial year. The company will be increasing the amount of cash it pours into Sky Originals by 25% and rolling out Sky Q to the aforementioned European markets. On top of this, the business plans to create 300 new technology roles and continue scaling up Sky Mobile which achieved “high single-digit share of sales” in June.

Everyone’s a winner

Despite the return to growth in Q4, the shares were flat as a pancake in early trading, suggesting that most market participants are more concerned with the outcome of the proposed takeover than the performance of the underlying business at the current time. Personally, I think most private investors would do well to kick back and relax.

If the deal does go through, holders will collect their 1,075p per share and move on. Although it would be decidedly unFoolish to buy shares in any company on the possibility of a takeover, doing so here would see a capital return of just over 11% — based on today’s price of 966p — if Rupert Murdoch were given the green light to proceed. 

If the deal doesn’t go ahead, I can still see Sky’s investors benefitting. Although the share price would be temporarily knocked down, the £200m break fee paid by Fox would almost certainly be returned to shareholders. What’s more, the inevitable dip in price would allow existing and prospective investors the opportunity of buying a solid business at a reduced price. This scenario is particularly attractive given that Sky’s shares already look fairly cheap, trading as they do at 15 times earnings for the 2017/18 financial year based on forecast EPS growth of 14%. Indeed, with a price-to-earnings growth (PEG) ratio of just 1.07, new investors look like they would be getting a cracking deal for their money. The predicted 3.7% yield looks safely covered even if levels of free cashflow have dwindled over the last few years due to increased investment.

There are no guarantees when it comes to investing. That said, I wouldn’t be concerned if I were a Sky shareholder, regardless of what happens next.

The post Shareholders of Sky plc are in a win-win situation appeared first on The Twelfth Magpie.

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Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This conclusion follows a three-month investigation by the media regulator Ofcom, which seems to have concluded that the deal will hand too much influence over the UK media to Murdoch-controlled entities. The deal is not dead just yet though as the parties have until July 14 to respond before Ms Bradley makes her final decision on referral. Other regulators in the EU and Ireland have already passed the deal.

Mixed outcome

For shareholders, this outcome is a mixed blessing. On the one hand the chances of the deal going ahead are now much reduced, but on the other hand, if Fox does not complete the transaction it has agreed to pay Sky a £200m break fee. Fox had also planned to complete the takeover by the end of 2017, or pay a 10p per share special dividend, which would cost the media group just under £172m.

If the deal does not go ahead, while Sky’s shareholders will not receive the 1,075p per share in cash promised, the company will likely return the break fee to investors in addition to the special dividend. With this being the case, it’s no surprise that shares in Sky have rallied by nearly 4% on today’s news.

Still a buy 

From a longer-term perspective shares in the pay-TV provider also look attractive. At the end of April, the company released its results for the nine months to the end of March, showing a 5% increase in revenue on a constant currency basis, despite a 3% fall in advertising revenue. For the British TV advertising market as a whole, revenue fell about 8% so on this metric, Sky is outperforming the rest of the industry. The group’s European divisions also reported a strong performance with revenues up 10% in Germany and 7% in Italy. 

Unfortunately, due to higher costs associated with sports broadcasting rights, profits took a hit during the period, and City analysts expect this to be reflected in full-year results. Analysts have pencilled-in earnings per share for the year of 56.5p, down 10% year-on-year. Nonetheless, for the fiscal year ending 30 June 2018, growth is expected to return with earnings per share growth of 17% projected. 

Compared to this growth, shares in Sky don’t look overly expensive, currently trading at a forward P/E of 16.9, falling to 14.5 for 2018. In addition to this attractive earnings multiple, the shares support a dividend yield of 3.6% and the payout is covered 1.6 times by earnings per share.

Conclusion

Overall, while today’s news from the government is disappointing, it is certainly by no means the end of the Sky/Fox saga. The two companies will continue to push to get the deal done and if it falls apart, Sky is set to receive several hundred million pounds in benefits, an excellent sweetener for disappointed shareholders.

The post Is Sky plc a buy as Twenty-First Century Fox Inc takeover hangs in the balance? appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves owns shares of Sky. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Piggy bank

That now looks like a mistake. The firm’s share price is up 43% over the past 12 months. Today it announced that the show’s award-winning animation studio, Astley Baker Davies, is set to make 117 brand new episodes, securing a pipeline of piggy content for another four years, starting from spring 2019. You can imagine how excited I am about that. Although to be honest, it was never in doubt. Entertainment One was hardly likely to stop feeding at this lucrative trough.

Peppa Pig has conquered the world, hogging the TV schedules in the UK, Australia, US, Spain, Italy, France, Latin America and South East Asia. In China, it has generated more than 24.5bn views since launch two years ago. I have even watched it in Norwegian, although it loses something in translation.

Wallowing in money

Entertainment One has signed Peppa Pig contracts with licensing partners all over the world, recently adding a new line of toys in Brazil, and 40 partners in Russia covering toys, games and confectionery. The company’s market capitalisation is more than £1bn. City forecasters are predicting highly impressive earnings per share (EPS) growth of 18% in the year to 31 March 2018, and another 10% the year after. Yet you can still buy the stock at a bargain 12.15 times earnings. This swine is a real pearl.

Satellite broadcasting giant Sky (LSE: SKY) is a much bigger beast, with a market cap of £17.22bn. It has also had a good 12 months, with the share price currently trading near its 52-week high of 1005p, thanks to the takeover bid by 21st Century Fox. When the news broke on 5 December Sky’s share price soared from 754p to 1,000p, and has hovered around that level ever since.

Skyfall

The politics behind the bid are ugly, given Rupert Murdoch’s controversial reputation, and fears over media plurality. Yet the European Commission has given it the green light, based on competition grounds. UK regulators examining the proposed takeover should have reported on Tuesday but have been given an extension until after the general election, with a new deadline of 20 June. 

Sky’s directors agreed to Fox buying the 61% of the UK broadcaster it does not already own in a deal worth £11.7bn. Murdoch has a habit of getting his way, especially when politicians are involved, and most analysts expect the deal to go through, including RBC Capital Markets, which reckons investors should buy on that basis. Be warned: there is a slim chance that the deal will collapse, which could knock 10%-15% of the share price. However, that would also offer a compelling buying opportunity.

The post 2 must-see growth stocks trading at bargain valuations appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.