Wall Street pays it forward

Favorable P/Es benefit Disney, Comcast

If you want to know how a broadcast network is doing, check its ratings. To see how the stocks of the companies that own the nets are doing, look at their P/Es — and based on this measure, the winners in the Wall Street ratings race are Walt Disney Co. and Comcast Corp.

P/E, short for price-to-earnings ratio, is a quick way to compare stocks by dividing the price of the stock by the company’s earnings. You can use the most recent 12 months of earnings history (“trailing earnings”), but many investment pros think that’s like driving a car looking only through the rear-view mirror.

For many, a better comparison can be had by looking at the “forward P/E,” which is the stock’s price divided by the estimated earnings for the coming four quarters.

To arrive at this measure, most people use the consensus estimate of the Wall Street analysts who follow the stock. Data provider Thomson Reuters compiles such numbers for individual companies and for major stock market indexes.

Based on estimates for calendar 2012, parent companies of two of the big four nets, CBS Corp. and News Corp., are selling at P/Es close to that of the market. But favorable forward P/Es have investors willing to pay more for every dollar of expected earnings at ABC parent Walt Disney Co. and NBC owner Comcast Corp.

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