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Undervalued Sports and Entertainment Mecca a Slam-Dunk Investment

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With lucrative and coveted broadcast deals either signed or in the pipeline, the Madison Square Garden Co. is positioned to perform like a champ.

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A Winning Year

Despite the headline-grabbing tu-mult within the NHL, Madison Square Garden enjoyed a stellar 2012. For its fourth quarter and fiscal year 2012 ending June 30, the company soundly beat consensus estimates for revenue and earnings.

Fiscal 2012 revenues of $1.3 billion grew 8% , compared to the previ-ous year, primarily from an increase in revenues in the MSG Sports and MSG Media segments. Fiscal 2012 earnings reached $106.5 million, or $1.38 in earnings per share ("EPS"), an increase of 34% from the previous year.

Fourth-quarter revenue was $332.9 million, an increase of 42% from the same period a year ago, driven by higher revenues in all three of the com-pany's business segments. Fourth-quarter earnings were $28.6 million, or $0.37 in EPS, a whopping increase of 235% from the same quarter a year ago.

Company management credited the fourth-quarter home run on an in-crease in sports revenue, partly stem-ming from the 11 home games that the Rangers played in the 2012 playoffs, compared to last year's two games. The condensed NBA schedule and increas-ing attractiveness of the facility because of renovations also played a role.

Moreover, 95% of Knicks sea-son tickets and 90% of Rangers tickets have been renewed for the 2012- 2013 season. Madison Square Garden is charging an average of 9.5% more for Rangers season tickets and 4.9% more for Knicks tickets, although the Rangers' revenue won't be real-ized in the unlikely event that the entire hockey season is canceled.

The stock's price-to-earnings (P/E) ratio is about 29, roughly in line with the entertainment sector's P/E of 28. With lucrative and coveted broadcast deals either signed or in the pipeline, this company is positioned to perform like a champ. For more top picks like MSG, check out one of these free stock research reports.

This article was originally published on Investing Daily by John Persinos.

Twitter: @investingdaily
No positions in stocks mentioned.
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