Comcast has been treading water for the past six months, recording a small loss of 0.6% while holding steady at $37.95. The stock also fell short of the S&P 500’s 8.8% gain during that period.
Is there a buying opportunity in Comcast, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.We don't have much confidence in Comcast. Here are three reasons why there are better opportunities than CMCSA and a stock we'd rather own.
Why Do We Think Comcast Will Underperform?
Formerly known as American Cable Systems, Comcast (NASDAQ: CMCSA) is a multinational telecommunications company offering a wide range of services.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Comcast grew its sales at a weak 2.5% compounded annual growth rate. This fell short of our benchmarks. 
2. Inability to Grow Domestic Broadband Customers Points to Weak Demand
Revenue growth can be broken down into changes in price and volume (for companies like Comcast, our preferred volume metric is domestic broadband customers). While both are important, the latter is the most critical to analyze because prices have a ceiling.
Over the last two years, Comcast failed to grow its domestic broadband customers, which came in at 31.98 million in the latest quarter. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Comcast might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
3. Previous Growth Initiatives Haven’t Paid Off Yet
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Comcast historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.6%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.
Final Judgment
Comcast falls short of our quality standards. With its shares trailing the market in recent months, the stock trades at 8.7× forward price-to-earnings (or $37.95 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. We’d recommend looking at The Trade Desk, the nucleus of digital advertising.
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