About Grupo Televisa
I can’t say that I’ve ever indulged in Mexican television, but I can say that as of these last few weeks I have learned a lot more about Mexican television than I ever thought I would.
Headquartered in Mexico City, Mexico, Grupo Televisa is one of the largest media and telecommunications companies in Mexico, focusing on offering satellite and cable services across the Country. The company produces and distributes content en espanol, its primary revenue streams being its cable division (accounting for just about two-thirds of its entire revenues), generating sales like basically every single other cable company by charging users monthly subscription fees for access to cable and channels therein, with the rest of the company’s cable revenues residing in its direct-to-home (DTH) satellite branch, Sky Mexico, distributing media packages to those all across Central America.
Additionally, it should be somewhat intuitive that the company also generates sales through advertising, and boy does Grupo Televisa have a rather substantial foothold in the linear advertising space in Mexico (controlling around 60% of the entire market in the region), also producing a variety of popular shows on its channels (yes, including telenovelas, no need to fret, which are quite popular in Mexico), lastly offering users some streaming outlets, through its platform by the name of ViX, offering users both an ad-supported experience as well as a subscription-based service.
This all sort of leads me to think of this company as the Mexican Comcast.
At any rate, in terms of whether or not one could reasonably consider this company to be resistant to recessionary pressures or not, it is hardly a secret that the company, like any other, has its fair share of sensitivities when it comes to its ad-supported platforms (which most are, to be completely transparent), as when periods of economic uncertainty occur, its advertisers tend to trim their marketing budgets, usually translating into less revenues for Grupo Televisa during certain economic seasons.
Another fact of the matter that leads me to think that this company’s revenues aren’t all that well protected is that when the economic tide turns for the worst, users across all of Televisa’s platforms are likely to cut back spending as well, as these sorts of monthly subscription packages and satellite packages are just about as discretionary of expenses as they get.
Just something else to chew on, not trying to just be a bearer of bad news, but rather, real news, as I know there are likely some positives, some more general yet weighty ones being its market share, relative pricing power, extensive in-house and associate media catalog, and the extraordinarily high barriers to entry in the media production space, to name a few.
With this brief introduction of Grupo Television, I am now going to dig into what I do best and analyze this company strictly from the perspective of its financials, ultimately waging my opinion on whether or not the company’s stock (NYSE: TV) is worth contemplating an investment in for the days that come.
Televisa’s stock financials
In terms of the company’s market capitalization, Grupo Televisa is a $1.37 billion enterprise with a stock price of $2.46, also accompanied by an inexistent price-to-earnings (P/E) ratio and an annually issued dividend in the amount of $0.1993 (specific enough?), with the invisible price-to-earnings ratio leading me to believe that Grupo Televisa is not currently (net) profitable, the P/E absence implying that it doesn’t have any positive earnings to display for the time being.
I’ll verify later, don’t you worry.
Other than that, I don’t feel as though there isn’t much else here to be terribly thoughtful about, as the company’s market cap is just a generalized measure of how much it is deemed to be worth today and the dividend is there, albeit sort of puny and net insignificant in my eyes.
In an effort to obtain more useful information about this company, it can be found that its executives are responsible for taking care of and strategically making the best out of $15.4 billion in terms of total assets as well as $8.4 billion in the total liabilities category, which, for a firm with such extensive and diversified operations throughout Central America having a rather comforting total cash and equivalents position with specific respect to its total current assets, its cash and equivalents pegged most recently at just under $1.8 billion with its total current assets weighing in at around $3.7 billion, clearly maintains a decent cash position.
Nevertheless, in doing some more digging into the health of Televisa’s balance sheet, sure, this cash position allows the firm to sufficiently service its short-term obligations, but I’ve found a few necessary points of caution, including its relatively high debt load, with its net debt position standing almost six times EBITDA, which to any reasonable investor is cause for eyebrow raising, not to mention that upon performing some further research into its books that it has an interest coverage ratio of 1.3, which is actually pretty low, indicating that a considerable portion of its earnings are being used to service its debt(s), which also tracks with the firm not presently being able to display a price-to-earnings ratio.
From my vantage point, the moral of the story is that for the foreseeable future, Grupo Televisa has a durable balance sheet that is equipped to take on some non-extraordinary challenges, but given the aforementioned notes on its debt and relevant ratios, one would undoubtedly be wise to keep an eye on the company’s intermediate and long-term progress on its financial obligations and its ability to service its debts moving forward.
As it relates to the company’s income statement, Televisa’s annual revenues since 2019 have been pretty flat, ranging between a base of nearly $3.7 billion in 2021 and a relative high of $5.4 billion in 2019, COVID-19 obviously bearing some strain on the company in the early 2020s, but the reason the company’s revenues still held up fairly well can mostly be attributed to its streaming offerings, being a solid buffer for when its studio operations came to a halt. Another general positive is that following 2021, the company’s revenues have been steadily rising back towards $5 billion territory, but what is perhaps more encouraging is that there are some more reasons to be more bullish than before with regards to its revenues in the coming years.
Primarily, a key division of Grupo Televisa by the name of TelevisaUnivision recently reported a 6% uptick in consolidated advertising revenue, not to mention that the firm also recently reported remarkable growth in ad revenue to the tune of 18% in Mexico alone. Much of the company’s revenue growth is stemming from ViX (its streaming division, which, by the way, is set to become a profitable operation towards the end of 2024, or in the coming earnings report), but also coming out of the current election cycle and the continued commentary thereof, being that the company is a leading political advertiser across Central America, with the main political breadwinner channel for this company being TelevisaUnivision, which has a major foothold in certain key markets in the United States.
In a nutshell, these just happen to be some of the major reasons I am rather optimistic regarding the company’s revenues, especially in the short run as it relates with election press, and more so in the long run with its streaming arm. Before proceeding onto the company’s cash flows, it is worth mentioning that Televisa has recently been very intentional about hewing down and consolidating operations already under its corporate umbrella, the best example being its combining its Sky division and its Cable segment, being quite a tangible and promising means of increasing its ability to turn over significantly more cash flow.
On a more micro level, it also significantly increases the value proposition for its viewers, reducing churn, or customer/viewer turnover, just making itself even more competitive than before.
Lastly, ridding itself of some of these less productive or value-degrading assets and operations also justifies this company’s revenues coming down a bit in the short-term, in my perspective, especially when it means there is improvement in terms of the company’s operating cash flows occurring as a result.
On the basis of the company’s cash flow statement, Grupo Televisa’s total cash from operations during the same 2019-2023 era haven’t exactly painted the prettiest of pictures. More specifically, the company’s total cash from operations have undulated at a rate similar to that of its revenues, peaking at just below $1.7 billion (2020) and bottoming out at a relative recent low of $640 million, as reported in 2022. Upon conferring with some past reports from the company, it seems that the Mexican media conglomerate undeniably benefited from the Pandemic in the sense that a historically inordinate amount of folks in the region were stuck at home watching TV or streaming from yours truly’s various platforms, with the decline (in both revenues and associated cash from operations for that matter) stemming from normalization in consumer behavior and demand for the company’s platforms and services, combined with a rise in aggregate operating costs coming out of COVID-19, not to mention some recent revenue softening coming from Sky specifically. Nevertheless, the positive here is that Grupo Televisa’s management has been swift in making the necessary adjustments with Sky, an example being the aforementioned combination with itself and its Cable unit.
Televisa’s stock fundamentals
On the front of the company’s net profit margin (as it shown on Charles Schwab’s brokerage website), Grupo Televisa’s is listed as -10.90%, which is largely rooted in the company’s recent revenue declines in the 2019-2023 era but seemingly more so its increased finance and income tax expenses incurred in 2023, but I actually think there are some positives to this picture.
Calling it what it is, Grupo Televisa is in a transition phrase and while the market may not maintain the most visible confidence in the company on the standpoint of profitability, a lot of good is likely to come out on the other end of this transition, as Televisa’s cash flow has improved in more recent fiscal quarters, with, for example, its nearly 38% increase in operating cash flow in Q2 2024 accompanied by a 26.6% margin, putting this company’s focus on profit-generative activities on fully display. Additionally, being that one of the main question marks of Televisa is its Cable department, management is actively restructuring so as to optimize its capital expenditures and better its ability to spew some more consistent cash out of Cable.
Should you buy Televisa stock?
In a current stock market environment consisting of most name-brand companies trading at or near all-time highs, it is my opinion that smaller, lesser known yet credible and structurally important companies that are indulging in turnarounds have become all the more attractive.
Of course, there are also risks at play in addition to the rewards to be potentially obtained in companies such as Grupo Televisa, especially when incorporating the fact that it is a company that happens to host the vast majority of its operations in different countries, offering a great deal of things to consider prior to touching a single share of this company’s stock (NYSE: TV).
Nevertheless, in summarizing everything that we’ve seen in this company and its stock in the scope of this stock analysis article, Grupo Televisa is a large, important media conglomerate de Mexico, with its stock trading at a very attractive historical valuation, a balance sheet that is good (not great), touting slightly volatile revenues (starting from 2019), with its total cash from operations maintaining a similar posture and its net profit margin objectively down in the dumps for the time being.
Emphasis on for the time being.
I see a surprising amount of catalysts lined up and in order to give this company the push it needs to get its stock back on track and get current shareholders and the market overall excited about Mexican television again.
Kind of kidding about that last part, but kind of not.
In all seriousness, the company’s executives are making the necessary value-accretive shifts to get this company back on track, and when putting everything together, call me a contrarian because I still think it makes sense to lend the stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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