CMCSA is undervalued due to low P/E and high FCF yield; potential for re-rating exists but requires confirmation that EPS decline is temporary.

Stock number three I'm going to share today is Comcast, ticker symbol CMCSA. This is another stock that's done terrible. Over the past 5 years, it's down 61% and it's down another 30% this year.

So, that's the risk when we're talking about 52-week lows. This stock has been at a 52-week low for 5 years straight, and you can continually find new lows. But the question is is Comcast just getting stupid cheap.

You can see the company actually has a very good track record of dividend growth, paying since 2008 with consecutive annual increases, although they have kept the dividend flat for nearly 2 years right now.

You can see over the past 10 years, the dividend's grown 156%. That's a 9.8% CAGR, and it's up 40% over the past 5 years. And even over the past 3 years where the stock's been doing terrible, the growth is still 21%.

But this is the part that's getting really interesting. It's at a historically high dividend yield. Forward-looking yield's now 6.02%. This is a major outlier. Over the past 5 years, the median is 2.89% and it was 2.12% over the past 10 years.

And that 6% yield has you wondering if Comcast stock is just too cheap to ignore.

Because here's the the this is not a dividend cut risk unless they just want to cut it for management reasons. Their free cash flow payout ratio is 23.1% over the trailing 12 months.

It's 22.4% in 2025. It's actually improving. The earnings payout ratio is 42% over the trailing 12 months, and it was 24.5% in 2025.

And then when we look at earnings, this stock is trading at 6.3 forward-looking P/E ratio, 7.09 over the trailing 12 months. And earnings per share have gone up over the past decade.

Albeit the past four quarters, it does seem to be going down. So, if you're thinking of buying the stock, you should be looking into that and reading the latest earnings report as well.

You want to make sure this is not a long-term continued decline, and that's always the risk with these value stocks that are trading at super cheap P/Es. It's always about are the fundamentals actually declining?

But, you can see that's the risk. EPS has been shrinking over the past year, but it's also trading at its cheapest P/E ratio over the past five years, cheapest over the past 10 years, cheapest going back to 2007.

And a six P/E ratio is like crazy. This company generated 20.4 billion dollars of free cash flow over the trailing 12 months. 20.4 billion dollars. The market cap is 77 billion dollars.

It is trading at three and a half times their annual free cash flow. Here you can see its dividends 4.86 billion dollars. That's over the trailing 12 months. They started repurchasing shares.

They can afford to repurchase shares. Interest only, that has been going down as well recently though.

Now, the bad thing with Comcast and a lot of these dividend stocks and especially in the top telecom space like Verizon, AT&T, they have tons of debt. Comcast has that infrastructure side of the business, the broadband, and they use debt to that.

I mean, that you understand how they justify it cuz it's very reliable subscription revenue, but they have been paying off this debt and it's down to 82 billion dollars net debt.

That's in the latest quarter. It peaked at 107. They also have been spinning out some of those cable TV assets, which will likely be a good move and potentially could lead to them trading at a higher multiples going forward.

If we look at the value graph for Comcast, no matter how you crack the egg, it is looking super cheap. It's trading well below the median multiple the stock has traded at. Here you can see based on earnings per share, over the past 10 years the median multiple is 14.3.

If it ever returned to trading at that, it would imply a fair value of $54.22, which would be 147% upside from here. The median dividend yield over the past 10 years has been 1.99%.

If it went back to that, $66 fair value, 202% upside from here. For free cash flow, median multiple has been 14.11 over the past 10 years. Price to free cash flow ratio, it's currently 3.83, crazy.

If it went back to this, implied fair value $80, 268% upside. So, this is your margin of safety if you're buying into Comcast stock.

If you do the dividend discount model on Comcast, and this is a conservative way to value a stock, if you're going for a 10% return, 6.68% CAGR, which is what it was over the past 3 years, that gives an intrinsic value of $33.25, 51% upside from here.

And even if you expect lower dividend growth, like 4%, then it's basically around fair value just from the dividend alone. And as I mentioned, that dividend's not really representative of their cash generation.

Theoretically, if they wanted to, they could just pile all of that money towards paying off debt. I mean, they're at like a 25% free cash flow payout ratio. Get the business in a more attractive position.

Like, this stock is so cheap it has you wondering, like, what are you missing about it? And you have to always ask ask that question. Like, I get the cable TV assets are declining, and they're getting rid of those.

I get the media company is also weird, and there's like some flux. I don't even know what the latest thing is. They're always talking about spinning that out, maybe. Then you have the broadband and the cable TV subscription angle of it.

You got Peacock streaming. I don't think Comcast's internet broadband business is going to go away. It might not be a growth thing for the company, but it definitely will generate a lot of cash flow and reliable subscription revenue for years to come.

Now, I don't think they're going to be able to upsell people into that cable bundle really long-term. They can take some cash from it. So, I don't know. Give me your thoughts in the comments what you think about Comcast.