BloggingStocks Interview: GE CFO talks up NBC Universal

Another way to look at NBC Universal's value is to compare it to other publicly traded TV networks like Viacom Inc. (NYSE: VIA), The Walt Disney Co. (NYSE: DIS), or CBS Corp. (NYSE: CBS). Those three trade at Price/Sales (P/S) ratios of 2.4, 2.0 and 1.8 respectively. (Since I don't know NBC Universal's net income, I thought P/S would be a reasonable valuation basis). Doubling NBC Universal's first-half revenues to $14.2 billion and applying the Viacom, Disney and CBS P/S ratios would yield a value for NBC Universal between $26 billion to $34 billion.

Admittedly my valuation approach is quite crude, but GE's valuation seems high if my analysis is even close to being right. While I didn't get the impression that GE is eager to sell NBC Universal I wondered whether Sherin's mentioning a value could have been a subtle suggestion that GE would sell it for the right price.

Update: A reader suggested I use estimates of NBC Universal's net income to estimate its value. When I did that, Sherin's estimate of NBC Universal's value looks quite reasonable. I applied the GE Corporate ratio of net to operating income of 83% to NBC Universal's operating income which yielded an estimated 2007 net income for NBC Universal of $2.66 billion (this is 83% of $3.2 billion -- twice NBC Universal's first half operating income of $1.6 billion). Applying the Price/Earnings ratios of Viacom (20.2), CBS (18.6) and Disney (16.1) to that $2.66 billion yields valuations for NBC Universal ranging from $42.8 billion to $53.7 billion. On this basis, Sherin's estimate seems conservative.

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This is the first of three GE posts that will run today:

• The second analyzes GE's business
• The third post discusses GE as an investment play on emerging markets infrastructure buildout

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns General Electric stock.