Is Comcast Corporation a Buy?

Shares of media giant Comcast (NASDAQ: CMCSA) are off to a bad start this year. Since January, all of last year's double-digit gains plus a little extra have been wiped out. Comcast isn't exactly a beloved organization if you ask cable and internet service customers, but the stock looks like a pretty good deal at this point.

What just happened?

Comcast posted solid financial results to close out 2017 and followed it up with another overall positive report to begin 2018. Revenues grew 5.1% in 2017 and 10.7% in the first quarter of 2018. However, with an overall decline in the stock market beginning in January as a backdrop, investors were likely looking for more to warrant last year's big advance.

Added to the mix were worries over cord-cutting. Many consumers are parting ways with their home phone line and cable packages, a trend Comcast had been able to fend off until 2017. In February, Comcast also made a higher bid for British TV company Sky Broadcasting than the one being made by Twenty-First Century Fox -- which is pending a merger with entertainment conglomerate Disney. The complicated love triangle added to investor angst, creating a perfect storm for a stock pullback.

When unloved companies are a good deal

After the steep declines, shares look like a good deal in spite of worries. The NBCUniversal segment is going strong, benefiting from healthy TV broadcasting and theme park income. Though 2017 was a slowdown in the movie business, 2018 could see a return to growth with the next installment in the Jurassic World trilogy coming out in late June -- the last movie grossed over $1.6 billion worldwide at the box office.

On the consumer business side, while video and phone clients keep declining, overall customer relationships continue to rise due to more internet service subscribers. However unloved that consumer business may be, it's nevertheless a very profitable enterprise. Trailing 12-month price to free cash flow -- cash left over after basic operations are paid for -- currently sits at 15. One-year forward price to earnings sits at only 12.7 with the expectation that the company will continue to slowly grow and return capital to shareholders with its share repurchase plan. That's the cheapest Comcast has been in years, even though business keeps grinding higher.

Besides valuation, there's another reason to like Comcast's stock. Last year, the company paid out $2.9 billion in dividends and repurchased $5 billion worth of its own shares. The quarterly dividend was raised to $0.76 a year, making for a current yield of around 2.1%, and management reiterated that it will purchase another $5 billion of its stock in 2018, or about 3.4% of Comcast's market cap as of this writing. With the dividend, that adds up to a 5.6% return to shareholders in the upcoming year.

It can be tough to bet on a company after its shares plummet double digits in a short time period, but this downturn looks overdone for Comcast. Despite challenges from cord-cutting, the rest of the media and entertainment empire is solid and is in an uptrend, and investors should benefit from management's policy of returning extra cash to shareholders.

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Nicholas Rossolillo and his clients own shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.