Forbes says buy WWE stock

[Dod Draper]

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.

We also believe that WWE’s business model and strategy is under-appreciated because of the somewhat silly product it sells.

Investors do not seem to recognize the scalability of the WWE product. WWE can tape one match and sell it into as many markets as it has viewers. International growth prospects for the company are, therefore, strong. The company has plenty of cash to fund international growth with excess cash at $207mm (over 20% of market cap). At the same time, the company enjoys relatively low and fixed costs of goods sold as the salary paid to its wrestlers is roughly the same no matter how many viewers see a match.

There is little to no requirement for research and development. The biggest expense is advertising, which is significant at about 27% of revenues, but it is also very controllable and can be cut when times are tight to preserve profit margins.


Special Offer: Check out these gains from September 2010 through February 2011 for Forbes Growth Investor subscribers: Wesco +75%…Hanger Orthopedic 99%. The entire growth portfolio is up 60%. Click here for editor and portfolio manager Taesik Yoon’s latest buys and sells.



WWE fans tend to be very loyal as anyone who has ever attended any of WWE’s live events can attest; so advertising is mostly focused on getting new customers. WWE also enjoys a fairly low cost of talent. Most of its wrestlers are ex-athletes whose professional careers never developed or have ended.

In addition, WWE has rarely, if ever, been beholden to any one wrestler in a way that professional sports teams can be beholden and forced to pay a particular athlete. There is a large and steady pipeline of ‘actors’ willing to take the WWE stage. Anytime a particular ‘actor’ gets expensive, WWE can replace him or her with a new, cheaper version.

WWE gets our “very attractive†stock rating because the business is throwing off a lot of cash, showing strong growth in profits while its valuation implies economic earnings will never grow from current levels when we see strong upside potential. WWE fits the risk/reward pro*file of a great stock to buy.

For details on what causes the dif*fer*ence between eco*nomic ver*sus account*ing prof*its during the last five fiscal years, see Appen*dix 3 on page 10 of our report on WWE. See Appen*dix 4 to learn how WWE increased net operating profit after tax (NOPAT) and its NOPAT mar*gin from 9.5% to 10.8%. WWE’s ROIC (detailed in Appendix 7) rose from 18.8% to 22.2%. WWE’s invested cap*i*tal grew more slowly than revenues; so invested cap*i*tal turns rose from 1.98x to 2.09x during the last reported fiscal year.

http://blogs.forbes.com/greatspecul...the-market-buy-world-wrestling-entertainment/

C'mon guys, what you waiting for? Buy up.

 

[Prodigy]

Where can I buy it from? Seems good to me and like to do it before Wrestlemania.

 

[Troy]

Looking at the statistics it has some pretty good numbers. The key for the WWE stock is they pay out huge dividends. Currently at this price the dividend yield is 11.27% which is very high, each year they pay you 11.27% of the price you paid. It's earnings per share are still high and currently they can sustain the high dividend payments but if earnings drop I would worry that dividends would have to be cut dramatically. It's Price to Earnings is a bit on the high side and it would be better closer to ten. It is trending quite close to the 12 month low at the moment so now would be the right time to buy.

Overall I wouldn't see it being a high value capital gain stock but a good long term hold due to the high dividend payout.

 

[SpectreVLV]

Dividends are always great, and good dividends mean the stock is climbing. I checked the stock yesterday, and it climbed 80 cents in one month. Very nice for a $12 stock.

 

[Keith]

Hey it sounds a decent investment to me, if your into that kind of thing, I just have certain moral issues with putting my money behind someone as corrupt as Vince Mcmahon, but there you go.

 

[Deezy]

Hey it sounds a decent investment to me, if your into that kind of thing, I just have certain moral issues with putting my money behind someone as corrupt as Vince Mcmahon, but there you go.

LOL he is no different than any CEO in any huge company, but since he is not part of a conglomerate. That makes him better imo, since conglomoerates have zero morals and are profit driven, something Vince McMahon himself has proved to be otherwise.

Read the story and wondered what was with all the * for I's?

 

[Keith]

What makes you think he is not profit driven? I just find the guy slimey and evil, sorry.

 

[Deezy]

What makes you think he is not profit driven? I just find the guy slimey and evil, sorry.

Maybe the fact that he drops tons of money into things without guaranteed profits. Or the fact that his company grants how many Make-a-Wish kids wishes? Or the fact that troop shows were done when it wasn't cool to be down with the troops......I could go on.

Slimey and Evil could be used for any other CEO of a major company. Just because some people badmouth him, doens't mean he is evil, it makes him a businessman. You can't make money without pissing people off. That's just a fact of life.

 

[Keith]

No because I was not commenting on him as a busisnessman, but because of some of the questionable things he has done like promising Owen Hart's wife he would not broadcast clips of his funeral live on raw and then going back on his word, or the way he crudely cashed in on Eddie Gurreuro's death, or how he handled the Benoit incident, not to mention his dodgy political views, or his remarks on The Wrestling, need I go on? I think a lot of people would consider Vince a very unstable character not just me.

 

[Dademo]

I've never invested in a big name company, but the WWE seems to be doing good.

 

[Deezy]

No because I was not commenting on him as a busisnessman, but because of some of the questionable things he has done like promising Owen Hart's wife he would not broadcast clips of his funeral live on raw and then going back on his word, or the way he crudely cashed in on Eddie Gurreuro's death, or how he handled the Benoit incident, not to mention his dodgy political views, or his remarks on The Wrestling, need I go on? I think a lot of people would consider Vince a very unstable character not just me.

He didn't broadcast clips of Owen's funeral, the most he did was the tribute show. And he didn't cash in on Eddie's death, he got Eddie's wifes blessing to elevate one of his best friends to a world title. Not exploiting anything there, thats like saying anyone who dedicates anything to anyone is "cashing in".

Benoit situation is not wanting to be associated with a murderer. WTF are you on about? Erasing him from history is no different than Germans not wasnting to be associated with Hitler. Are you saying they are wrong too?

His political views are his views, and as a rich guy, ofcourse he would be Republican. Don't use politics to validate your hate for the man.

Also his remarks on The Wrestling? What are you talking about?

He might be considered unstable, but so would Trump, Branson, Steve Jobs NEED I GO ON?

Really, I get why people don't like him, he only brought Pro-Wrestling, a once great sport that was looked down upon by the masses out of the tiny smoky halls and into the mainstream. That man is evil.

 

[Keith]

1. Well I read in Power Slam than he went against his word with Martha, are you calling them liars?

2. It was Mcmahon's idea to use Eddie's death in that way, and even if it wasn't, he had the power to stop it, and out of respect for Eddie's memory he shouldn't have gone through with. And if you think what people saw on TV was just a guy dedacated a match to him, then you are very neive.

3. Who Benoit was when at the end should be seprated from who he was before, I can't condomn what he did, but clearly the guy was not in the right frame of mind, and for WWE to completely write him out of their history is disgraceful. I was also talking about their reaction to the press regarding the drug issue.

4. Someone being a Repulician, and supporting someone like Bush, and making the lame remarks he did about Ombama are two different things.

5. I meant the Wrestler as in the movie sorry. And what I meant was that around its release Mcmahon slated it for exposing the biz, and giving it a bad name, like he hadn't already done that himself!

 

[Deezy]

1. Powerslam is a smark fantasy magazine, I don't take anything of value from a magazine where the editor is responsible for Botchamania. that right there shows the sensationalism that goes there. I'd rather hear it from Meltzer, since he has the track record.

2. So you're just saying, damned if he did, and damned if he didn't? What exactly are you talking about? So it was Vince's idea, but if it wasn't he should've stopped it? That doesn't make sense. Eddie was a company man who would've gave his blessing to an angle like that. If he can go through with an angle about being a deadbeat dad and yell at his wife about not giving him a boy on PPV. Then why can't he be used in a feel good storyline? Also, have to take into fact that Eddie's wife was the one who could've stopped it, and didn't. Why? Because it's the wrestling business and anything to build an angle is always going to be used.

Let's not pretend like Lawler didn't just give the ok to use his mother to buildup his angle with Cole.

3. No Benoit's last three days should trump whatever he did for 20 years. Two innocent lives are more important than a career. No amount of time will matter, because he killed his wife and son. Act like Fatty Arbuckle should get a hollywood walk of fame because it's been long enough, people will forget he killed a woman. (if you don't know, google it). Or let's give Hitler a posthumous Nobel Prize for uniting his country from a depression and made them into a superpower in less than five years.

Wrestling fans are fucked sometimes.

4. LOLOLOL Look at Foxnews and re-evaluate that last statement.

5. The Wrestler did expose the business, and it's main character didn't have redeemable qualities. I could give my thougths on the movie, and the character as well, and it wouldn't be good ones I could tell you that much.

Also Vince McMahon exposed kayfabe, he didn't expose the business or the work that goes into it. Big difference between what the movie exposed and what Vince said in the 80s.

Can I ask you a serious question...........Is English your first language?

 

[Keith]

Can I ask you a serious question? Are you married to Vince Mcmahon or a long lost member of his family? Because you don't seem willing to admit that the guy has ever done anything wrong in his life. But anyway I am ready for some more, ROUND THREE:drum:

1. So I repeat my question, Are you calling Power Slam liars? And what reason would they even have to make something like that up, and besides they could get sued for something like that.

2. Vince has the final say on everything, so yes if he doesn't like something that isn't his idea he should stop it. And using someone who is still alive and someone who has passed away are two different things. Most people who saw the thing would say it was explictive and nasty. Orton's comments to Mysterio alone were way over the line.

3. Yes but WWE are not totally blameless in the Benoit issue, don't get me wrong I don't make light of how terrible the whole thing was, it was one of the worse things I have ever heard of. I just don't see it as being as black and white as you.

4. Yes The Wrestler did expose the biz, but as a filmmaker it is not Darren Aronofsky's responsiblity to protect wrestling, but to make an intertesting and true film about it and thats what he did, and as someone who clearly knows what he is talking about when it comes to films let me tell you, you are wrong the Wrestler is a great film.

There is a number of ways Vince exposed wrestling, like the idea of wrestlers having supposdely private talks in the back with a big television camera in the same room, or by turning Raw into glitzy TV show, rather than a wrestling show which just happens to be on TV. But enough of that I am talking about his character.

 

[Deezy]

Even though I'm a dude and Vince is a dude, and he lives in Connecticut, and I live in Canada....... nope, can't say I'm married to him. I never said Vince was an angel or anything. I said he was a damn good businessman, you started slamming his character, I didn't say anything about his character, but that didn't stop you from continuing with the mud slinging. So I stated facts that proved you wrong.

Also, just because a magazine says something, it doesn't make it true. Wrestling sites and magazines are nothing more than tabloids. There isn't much truth into what is reported and most of it is opinion pieces. So if it wasn't someone with a proven track record like Meltzer reporting it. It's not very believable in my eyes. Also you can't sue when it's opinion, that's a tactic Foxnews hides behind.

What is it about Vickie giving her blessing to use Eddie's name for storylines don't you get? It's not evil if you ask permission. Get that straight. And Jerry Lawler just did the same exact thing when Cole used his mother to buildup their angle.

There shouldn't be no grey area to a murder suicide, even if Chris was a victim of years of brain trauma it doesn't negate the fact that he took two lives. What isn't there to get about that?

WWE is just as guilty as the entire business as whole for what happened to Benoit and his victims. Maybe if he wasn't such a stickler for realism he wouldn't have took unprotected chairshots to the head, or if Harley Race didn't invent the flying headbutt, Benoit wouldn't have been doing it for 20 years.

In the end it shouldn't matter, because this souless fucker killed his wife and seven year old son. There is noone else to blame for that than Chris Benoit. This is not even debatable.

Also, The Wrestler was a movie about a selfish prick who pissed away his money and we're supposed to feel for this guy? The beginning shows that he was at Hogan levels in the 80s. Which should've made him a wealthy man right? Even if he squandered all of it, the indies still pay better for legends than it does for newcomers, and they don't stiff them on pay. Because they know they won't be able to book anyone else if they did.

Also, no fucking way a legend wrestler goes hardcore if they didn't want to. HTM gets $2000 to do nothing at wrestling events, and this guy was supposed to be a bigger star. No way this guy goes to CZW to get carved up so that by itself makes the movie bullshit.

Lets not forget about this guy totally bailing on his daughter, and when she forgives him, he does it again. So I'm supposed to feel for this selfish dickhead in the end? The only thing this movie got right was the lockeroom interactions.

There is a number of ways Vince exposed wrestling, like the idea of wrestlers having supposdely private talks in the back with a big television camera in the same room, or by turning Raw into glitzy TV show, rather than a wrestling show which just happens to be on TV. But enough of that I am talking about his character.

How is introducing backstage segments all of a sudden exposing the business? There isn't supposed to be locker rooms in arenas? Turning a looked down upon business like pro-wrestling and turning it into a mainstream success should be commended and not treated like it was the worst thing to happen.

Slick production turned pro-wrestling into an entertainment vehicle instead of the fake sport it tried to be. I for one think that is better than portraying itself as something it shouldn't have been.

Vince's character is that he is a shrewd businessman who can do some shady things, but like I said in my first post. It's no different than any CEO of any major corporation out there. You just have an axe to grind for no particular reason than someone who got fired talked shit and they must be right about the guy who fired them.