Charter Communications (CHTR) vs. Time Warner (TWX) Critical Analysis

Charter Communications (NASDAQ: CHTR) and Time Warner (NYSE:TWX) are both large-cap consumer discretionary companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, profitability, analyst recommendations, dividends, risk, valuation and institutional ownership.

Dividends

Time Warner pays an annual dividend of $1.61 per share and has a dividend yield of 1.7%. Charter Communications does not pay a dividend. Time Warner pays out 25.1% of its earnings in the form of a dividend.

Risk & Volatility

Charter Communications has a beta of 1.2, indicating that its stock price is 20% more volatile than the S&P 500. Comparatively, Time Warner has a beta of 0.87, indicating that its stock price is 13% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and target prices for Charter Communications and Time Warner, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Charter Communications 1 6 15 0 2.64
Time Warner 0 14 8 0 2.36

Charter Communications presently has a consensus price target of $390.63, indicating a potential upside of 44.65%. Time Warner has a consensus price target of $104.09, indicating a potential upside of 10.89%. Given Charter Communications’ stronger consensus rating and higher probable upside, equities research analysts plainly believe Charter Communications is more favorable than Time Warner.

Profitability

This table compares Charter Communications and Time Warner’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Charter Communications 23.55% 1.15% 0.36%
Time Warner 17.33% 19.99% 8.17%

Institutional and Insider Ownership

72.4% of Charter Communications shares are held by institutional investors. Comparatively, 80.1% of Time Warner shares are held by institutional investors. 0.8% of Charter Communications shares are held by company insiders. Comparatively, 0.2% of Time Warner shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Charter Communications and Time Warner’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Charter Communications $41.58 billion 1.54 $9.90 billion $2.65 101.91
Time Warner $31.27 billion 2.35 $5.25 billion $6.42 14.62

Charter Communications has higher revenue and earnings than Time Warner. Time Warner is trading at a lower price-to-earnings ratio than Charter Communications, indicating that it is currently the more affordable of the two stocks.

Summary

Charter Communications beats Time Warner on 10 of the 16 factors compared between the two stocks.

About Charter Communications

Charter Communications, Inc., through its subsidiaries, provides cable services to residential and commercial customers in the United States. It offers subscription-based video services, including video on demand, high definition television, digital video recorder, pay-per-view, spectrum guide services, and a package of basic video programming, as well as ad-supported free online video products. The company also provides Internet services, such as security suite that protects computers from viruses and spyware; in-home WiFi, which permits customers to lease high performance wireless routers to enhance their in-home wireless Internet experience; out-of-home WiFi; parental control features; and residential Internet services. In addition, it offers voice communications services using voice over Internet protocol technology; and broadband communications solutions, such as Internet access, data networking, fiber connectivity, video entertainment, and business telephone services to cellular towers and office buildings for business and carrier organizations. Further, the company provides video programming and music, Web hosting, email and security, and multi-line telephone services, as well as Web-based service management; and sells video and online advertising inventory to local, regional, and national advertising customers. Additionally, it offers fiber-delivered communications and managed information technology solutions; and security and home management services, as well as owns and operates regional sports networks and local sports, news, and lifestyle channels. As of December 31, 2017, the company served approximately 27.2 million residential and business customers. Charter Communications, Inc. was founded in 1999 and is based in Stamford, Connecticut.

About Time Warner

Time Warner Inc. operates as a media and entertainment company in the United States and internationally. It operates through three segments: Turner, Home Box Office, and Warner Bros. The Turner segment creates and programs branded news, entertainment, sports, and kids multi-platform content for consumers. It operates approximately 175 channels in 200 countries and territories. The Turner segment's networks and related businesses and brands include TNT, TBS, Adult Swim, truTV, Turner Classic Movies, Turner Sports, Bleacher Report, Cartoon Network, Boomerang, CNN, HLN, and iStreamPlanet; and digital properties comprise tntdrama.com, TBS.com, adultswim.com, and cartoonnetwork.com, as well as NBA.com, the NBA League Pass property, NCAA.com, the NCAA March Madness Live app, and PGA.com. It also licenses its original programming, and its brands and characters for consumer products and other business ventures. The Home Box Office segment provides premium pay and basic tier television, and video content services comprising HBO and Cinemax; operates HBO NOW, a video content service; and sells original programming through physical and digital formats, as well as licenses original programming through international television networks and video content services. As of December 31, 2017, this segment had 54 million domestic subscribers. The Warner Bros. segment produces, distributes, and licenses television programming and feature films; distributes digital and physical home entertainment products; and produces and distributes games, as well as licenses consumer products and brands. Time Warner Inc. serves cable system operators, satellite service distributors, telephone companies, and virtual multichannel video programming distributors, as well as digital distributors. The company was formerly known as AOL Time Warner, Inc. and changed its name to Time Warner Inc. in 2003. Time Warner Inc. was founded in 1985 and is headquartered in New York, New York.

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