January 3, 2011 - The DIRECTV Group, Inc. (DTV-NASDAQ) provides digital television entertainment in the United States and Latin America. The company provides direct-to-home (DTH) digital television services, as well as multi-channel video programming distribution services in the United States. It distributes approximately 2,000 digital video and audio channels, including basic entertainment and music channels, premium movie channels, regional and specialty sports networks, Spanish and other foreign language special interest channels, pay-per-view movie and event choices, and national high-definition television channels.

People watch TV, doesn't matter what the economy is doing. It's the cheapest form of entertainment, and even if you don't have a job, you pay the cable/satellite bill so you can have a laugh once in a while or keep up with world events. DIRECTV knows this and has plenty of profits to show for it.

The company has almost 19 million subscribers in the U.S. which make up 87% of revenues. The other 13% comes from Latin America. Programming comes down from the sky, transmitted by a fleet of 10 satellites. In the third quarter, DIRECTV added 174,000 new subscribers in the U.S.. As a comparison, DISH Network added 29,000 while Comcast lost 275,000. Average monthly revenue at DIRECTV was up 4% compared to last year in the third quarter to almost $89 a month.

While the U.S. is the main driver now, look for Latin America to take over. Brazil has a booming economy, and the company expects large subscriber gains there. With the 2014 World Cup hosted by Brazil, expect a sharp rise in subsribers as the country takes great pride in its football. It also has the Summer Olympics in 2016.

In the U.S., new subscribers are flocking to the premium packages, ones unique to DIRECTV. High income homes in particular like the service which means they have the means to keep their satellite receiver in these tough economic times.

Two areas are of concern: first is the amount of debt the company carries (as do all utility types). It's 94% of capital. Long term debt is $10.471 billion. Debt of less than 5 years is $3.340 billion. Long term interest payments are $100 million a year and the company earns 6 times that amount so payments are well covered. Still, when interest rates go higher, some of that debt will cost more. The second has to do with partnerships with telcos like AT&T which can add telephone and Internet capability to the satellite service. With telcos now offering their own triple-package of services, these partnerships will be of less importance.

More numbers: Market Cap is $33.26 billion. Trailing P/E is 24 but the Forward P/E is 13. Price to book is 50. Book value is .80. Operating margin for the last 12 months was 15.59% while Profit margin was 6.60%. Return on Equity was a magnificent 65%. Return on assets was 12.56%. Revenues were $23.46 billion. There's $2.99 billion in cash for $3.58 a share. Beta is .85. The stock is up 20.21% in the last 12 months. There are 833.72 million shares outstanding with a Float of 804.8 million. Insiders have 3.25% of the stock while Institutions have 88.90% of the Float. There is no dividend.

DIRECTV is on a roll. New subscribers are growing noticably. The market potential in Latin America is very attractive with Brazil offering the largest opportunity. While there's heavy debt, this is standard for any large utility. The company has very strong cash flow and is sitting on almost $3 billion in cash. It uses some of it to buy back shares but an acquisition is possible or maybe a dividend. Compeitition is heating up from telcos, but so far, they haven't dimmed DIRECTV's satellite beams.

- Company Web site: www.directv.com

- Ted Allrich