January 5, 2011

Discovery Communications (DISCA)

Discovery Communications is a current position that I made 2 buys back in November at $40.28 and $41.59.  It was profitable for awhile but has taken a 3% dip this week on higher volume.  It's also starting to approach support at $40 (see chart below) so I thought I should take a second look.

  • DISCA is currently trading ($40.55 close) at 19.1 times 2011 earnings which is more or less even with its 2011 estimated earnings growth of 19.8%.  (Estimated 2011 EPS has actually been revised $0.02 higher than when I first looked at it back In November)  One times earnings growth is cheap.
  • Median analyst price target is $45 - 11.1% from today's close.
  • To get only a 10% upside, DISCA only needs to trade at 1.06 times the 2011 growth rate.
Bottom line - I still like it and will take this as another buying opportunity at tomorrow's open.  Look for tomorrow's How I'm Doing to show another purchase or I'll post an explanation if something changes.

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