Over the past two years, Liberty Media Capital (NASDAQ:STRZA) has rewarded shareholders with a steady upward trend in stock price to the tune of nearly 76%. In the meantime, other media companies have struggled to adapt their businesses in the face of increasing competition and technological trends. Liberty's secret? A well-diversified portfolio of companies that operate independently and profitably. In its third-quarter earnings report, Liberty showed investors that the company, though richly valued and not growing as it did in the past, can still offer investors value in the form of subsidiaries readying for spinoff.

Quarterly checkup
For the third quarter, Liberty posted mixed results when compared to analyst estimates. On the bottom line and after one-time adjustments, earnings per share came in at $0.34 . According to Zacks Investment Research, this figure is well under estimates of $0.84. Revenue ticked up 2% to $555 million while OIBDA came in at $137 million -- a gain of 6.2% from the prior year's quarter. Operating income was flat with the previous year at $111 million.

These results are certainly lackluster, and no doubt contributed to the company's near-9% sell-off in the beginning of November. But there is a silver lining in one of Liberty's operating segments -- Starz. Luckily for investors, Starz is not only boosting profits for its parent company, but it's on the brink of becoming its own publicly traded entity -- one that will reward those who hold its shares.

Valuable names
While the name Liberty Media might not be on the radar of the average citizen, its subsidiaries certainly are. Liberty owns the Atlanta Braves professional baseball team, a 17% stake in Barnes and Noble (NYSE:BKS), a 35% stake in Live Nation Entertainment (NYSE:LYV), and, of course, an ever-increasing position in Sirius XM (NASDAQ:SIRI). Barnes and Noble is a troubled holding, given the 800-pound gorilla in its room: the Internet. The company is, however, well off its sub-$10-per-share lows. Entertainment promoter Live Nation has struggled in recent years as well, even while it maintains its status as the biggest promoter and ticket broker (via Ticketmaster) in the country.

The most interesting name under the Liberty umbrella has to be Starz. The premium cable company is expanding its subscription numbers while continuing to refine and improve its content offerings.

During the third quarter, Starz brought up subscriptions to 20.8 million, an increase of 9% over the prior year. Encore channel subscribers increased by 5% to 34.3 million. Both of these numbers are record highs for the company. In addition to this, the company launched on-demand services for both Starz and Encore that are meant to compete with HBO's HBO GO and MAX GO. These services, available on phones, tablets, and computers, and with some built-in software packages, are gaining an audience fast as they offer full TV and movie offerings to subscribers.

While for now it is giving Liberty a needed boost in the profit department, Starz will soon be its own company after a spinoff is completed.

Overall, revenue is up only 3% to $400 million while operating income actually decreased by 2% to $99 million. These lackluster numbers could create a pricing inefficiency going into the spinoff, and even less investor demand than the typical spinoff receives. With the growth of premium cable companies and their arguably better product offerings, Starz presents a unique opportunity to investors who have been looking for a pure play on the segment.

The call
As far as a buy or sell recommendation on Liberty Media, it is a bit richly valued for my taste. I believe the company has fantastic management. CEO Greg Maffei has done a respectable job widening the company's portfolio of holdings and not stepping in too many puddles on the way there. Chairman John Malone, who receives polarizing reviews, is a shrewd businessman and knows how to get things done. But with a one-year forward P/E of nearly 30, things looks just too pricey for my liking, given the limited growth prospects going forward. I will be much more interested in looking at Starz once the spinoff is complete, possibly before the end of the year.

Fool contributor Michael B. Lewis has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.