Is CBS a Buy At Current Prices?

With shares of CBS (NYSE:CBS) trading around $53, is CBS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

CBS operates as a mass media company in the United States and abroad. The company operates in the entertainment, cable networks, publishing, local broadcasting, and outdoor segments. Consumers seek entertainment of various forms and through an array of platforms at an increasing rate, and through its segments, CBS is able to fulfill consumer needs as it continues to release content that excites the masses. Consumers around the world always seek varied forms of entertainment, and CBS is dedicated to delivering that media, which can only lead to growth and rising profits well into the future.

CBS and Time Warner Cable's (NYSE:TWC) battle over retransmission fees is now settled, to the advantage of CBS. Time Warner Cable is being forced to pay a significant increase in retransmission fees, although the figure is still below $2 per subscriber per month. The blackout of CBS programming from Time Warner Cable is now ending, just in time for the start of the NFL season.

T = Technicals on the Stock Chart Are Strong

CBS stock has been flying higher over the last several years. The stock is now trading near all-time high prices and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, CBS is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of CBS options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
CBS Options	28.36%	60%	57%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Put IV Skew	Top Sliver Stocks To Invest In Right Now Call IV Skew
September Options	Flat	Average
October Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on CBS’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for CBS look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	16.92%	27.78%	9.32%	20.00%
Revenue Growth (Y-O-Y)	6.42%	6.43%	2.99%	1.58%
Earnings Reaction	3.86%	2.04%	3.95%	1.05%

CBS has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have been upbeat about CBS’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has CBS stock done relative to its peers Comcast (NASDAQ:CMCSA), Twenty-First Century Fox (NASDAQ:FOXA), Disney (NYSE:DIS), and sector?

	CBS	Comcast	Twenty-First Century Fox	Disney	Sector
Year-to-Date Return	41.84%	14.13%	45.47%	23.88%	29.58%

CBS has been a relative performance leader, year-to-date.

Conclusion

CBS is one of the largest nationwide providers of entertainment and mass media services. The company's dispute with Time Warner Cable is now settled, to the benefit of CBS. The stock has been rising higher over the last few years and is now trading near all-time high prices. Over the last four quarters, earnings and revenues have been increasing which have resulted in upbeat investors. Relative to its peers and sector, CBS has been a year-to-date performance leader. Look for CBS to OUTPERFORM.