David Trainer of Forbes.com is featuring an article about World Wrestling Entertainment stock and highly recommending it.
“Don’t be fooled by the histrionics and high-flying stunts. World Wrestling Entertainment is an excellent business. With a return on invested capital over 22%, it is one of the most profitable companies in the United States.
Though revenues fell in the last reported fiscal year, the company’s profits rose as it was able to cut expenses and boost margins. Few businesses are flexible and scalable enough to boost profit margins when revenues decline. And seeing how cheap the stock is leads us to believe that few investors have adequate appreciation for the strong economics of the WWE business.
Specifically, the current stock price (around $13) implies that investors believe WWE’s profits will never grow from current levels. There is no future profit growth in the stock price even though the company generated $87mm in free cash flow (10% of its enterprise value) and $36mm in economic earnings during its last reported fiscal year. WWE’s strong economic (as distinct from accounting) cash flows and its cheap valuation land the stock on our list of most attractive stocks for February.”