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Is World Wrestling Entertainment About to Get Pinned?

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Whether or not you think professional wrestling is real, the performance of World Wrestling Entertainment (NYSE: WWE) has been worthy of the championship belt.

For 2013, World Wrestling Entertainment is up more than 90 percent. As with so many other publicly-traded entities, especially those in the entertainment sector such as Disney (NYSE: DIS) and Twenty-First Century Fox (NASDAQ: FOXA), the bull market has treated the shareholders well.

But those owning the stock of World Wrestling Entertainment could be falling off the top rope and crashing onto the canvas -- as many indicators point to those shares being overvalued.

World Wrestling Entertainment is trading in very pricy territory for a "sport" that does not cater to the affluent.

Its price-to-earnings ratio is over 90. That is supposed to "improve" to just over 40 for the next year. By contrast, the price-to-earnings ratio for Disney is around 20. For Twenty First Century Fox, it is under 15.

Legendary investor Peter Lynch considers the price-to-earnings growth ratio to be one of the most important indicators.

For a fairly-valued company, it will be one. The lower the better. The price-to-earnings growth ratio for World Wrestling Entertainment is 4.82!

Don't be fooled by the generous dividend payment (or the "wrestling" inside the ring), either.

Yes, it is 3.32 percent, when the average dividend yield for a member of the Standard & Poor's 500 Index is around 1.9 percent. But the payout ratio for World Wrestling Entertainment is 252.60 pecent.

The average dividend payout ratio is under 35 percemt, at present. It earns $0.12 a share and pays out $0.15 in dividends: tough to see how that dividend can last for very long for World Wrestling Entertainment.

Many are betting the share price of around $14.50 won't be around much longer.

There is a short float of nearly 10 percent. A short float of 5 percent is considered to be troubling for a company.

There has also been a great deal of insider selling, which can hardly be considered bullish. The stock is down almost 6 percent for the last week of market action, so the shorts are being rewarded.

There could be even more profits ahead for those holding a short position on World Wrestling Entertainment, as the stock certainly appears to be overvalued.

Posted-In: News Short Ideas Dividends Small Cap Analysis Technicals Management Insider Trades Media

 

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