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4 Diversified Media Companies With High Financial Strength and Returns

In light of the Super Bowl, a game that draws massive TV viewership, four diversified media companies with high financial strength and returns on invested capital are Dolby Laboratories Inc. (NYSE:DLB), Imax Corp. (NYSE:IMAX), New York Times Co. (NYSE:NYT) and Saga Communications Inc. (NASDAQ:SGA).

Super Bowl brings a golden period for advertising

The 2020 Super Bowl takes place between the San Francisco 49ers and the Kansas City Chiefs this Sunday. According to CBS Sports.com, the Super Bowl is "more than just a football game": As one of the most-watched sporting events during the year, the game that decides the NFL's champion of the season gives a golden opportunity for advertisers to market their products to the audience. CBS Sports.com added that companies try to "one-up each other" with celebrities, humor, talking animals and other bizarre ways to get people to buy the company's product.


As such, investors might seek opportunities in the diversified media industry, an industry that includes companies that engage in advertising, publishing, broadcasting or entertainment. The Screener identified four companies that have a 10-year median return on invested capital of at least 10% and high financial strength, which considers debt and leverage ratios like interest coverage, cash-to-debt and debt-to-equity ratios.

Dolby Laboratories

Dolby Laboratories develops audio and surround sound for a wide range of media platforms, which include cinema, broadcast, home audio systems and in-car entertainment systems. GuruFocus ranks the San Francisco-based company's financial strength 10 out of 10 on several positive investing signs, which include robust interest coverage, a solid Altman Z-score of 10.6 and a high Piotroski F-score of 7.

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The company's profitability ranks 8 out of 10 on the back of operating margins that outperform 91.37% of global competitors despite contracting approximately 4.5% per year over the past five years. Additionally, the company's return on invested capital of 18.97% exceeds its weighted-average cost of capital, suggesting value creation.

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Gurus with holdings in Dolby include Jim Simons (Trades, Portfolio)' Renaissance Technologies and Michael Price (Trades, Portfolio).

IMAX

Through its proprietary software, IMAX produces high-quality, immersive motion pictures for filmmakers and studios. GuruFocus ranks the Ontario-based company's financial strength 8 out of 10 on several positive investing signs, which include a solid Altman Z-score of 3.38 and debt ratios that outperform over 85% of global competitors.

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IMAX's profitability ranks 8 out of 10, driven by operating margins that outperform over 88% of global competitors despite contracting approximately 7.4% per year on average over the past five years. Additionally, the company's return on invested capital of 11.1% exceeds its weighted average cost of capital.

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Gurus with holdings in IMAX include PRIMECAP Management (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).

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New York Times

New York Times publishes its flagship newspaper of the same name through a wide range of channels, including print, mobile and digital. GuruFocus ranks the New York-based company's financial strength 7 out of 10: even though debt ratios are outperforming just over 60% of global competitors, New York Times has a strong Altman Z-score of 4.98 and a return on invested capital of 19.63%, higher than its weighted average cost of capital of 7.54%.

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The company's profitability ranks 7 out of 10 on the back of profit margins that are expanding yet outperform just over 66% of global competitors.

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Saga

Saga acquires, develops and operates broadcast properties for a wide range of genres, including classic hits, adult contemporary, classic rock and country. GuruFocus ranks the company's financial strength 8 out of 10 on several positive investing signs, which include a high Altman Z-score of 3.75 and debt ratios that outperform over 79% of global competitors.

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Saga's profitability ranks 7 out of 10: Although the company's net profit margins outperform over 80% of global competitors, revenues and operating margins have declined over the past five years. Despite this, the company's return on invested capital exceeds its weighted-average cost of capital.

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Disclosure: No positions.

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