Long a pillar of the entertainment industry, Viacom (NASDAQ:VIAB) has fallen on hard times as of late. First, its Paramount film division has suffered a string of box-office flops, with its share of the box office falling to just 8% in 2016. Then there's its portfolio of television networks, once the envy of the entertainment industry, but have suffered amid increasing competition not only from peers like Walt Disney, but from the internet itself. Viewers used to have to tune into Viacom's MTV to view the latest music video, or to its Comedy Central network for a laugh -- now consumers need only head over to Alphabet's (NASDAQ:GOOGL) YouTube for the latest hit song and a laugh.

However, for reasons that are detailed below, shares in the entertainment conglomerate offer a compelling value to prospective investors. Read on to learn more.

An upwards moving stock price chart overlaid with a map of the world.

Image source: Getty Images.

Recent events

There's no other way to put it -- the last year or so has tumultuous within the C-suite of Viacom's management. The drama, which has been more than covered by the media, culminated with the resignation of multibillionaire Viacom Chairman and former CEO Sumner Redstone. Now, with the appointment of new CEO Robert Bakish, the situation appears to be on the mend, which is great news, because all has not been well, not only in the C-suite, but on the income statement as well:

Metric20162015Change
Revenue $3.32 billion $3.15 billion 5%
Operating income $706 million $839 million (16%)
Diluted EPS $1.00 $1.13 (12%)

Data source: Viacom February 9, 2017 Quarterly Earnings Results

While revenues were obviously headed in the right direction, profits were not -- which partially explains the company's low earnings multiple. However, this has not always been the case. In fact, lackluster growth could very well be considered an anomaly in the company's operating history. 

A look back

Historically, Viacom has a history of profit growth and solid returns on capital. In fact, its record over the years has been quite good.

VIAB Normalized Diluted EPS (TTM) Chart

VIAB Normalized Diluted EPS (TTM) data by YCharts.

Alas, perhaps caused by or contributing to the myriad problems at the top that the public has been more than privy to over the past year, the company's momentum has been all but derailed. Fortunately, there lies a strong case to be made that the company's inherent advantages remain intact, and brighter days lie ahead.

Content is king! 

Viacom was built into what it is today by 93-year-old Sumner Redstone, who built his empire on the belief that it was content, not distribution, that would fuel the entertainment industry in the decades ahead. When he made this shift, in the 1970s when he was working for his father's National Amusements theater chain, this was a novel innovation. Today, the world has caught onto this insight and is giving the company a run for its money. However, this should not detract from the company's prime properties, networks like MTV (and its derivative channels), as well as Nickelodeon, Comedy Central, Spike, BET, and CMT. On top of all this, the company is also the owner of Paramount Studios.

Despite increasing competition from all quarters, Viacom's networks are holding their own. For the quarter ended December 31, 2016, Media Networks' revenues rose 1% to $2.6 billion -- and this ignores an averse 2% impact due to foreign exchange losses. Softness in total advertising revenues (-2% to $1.29 billion) was balanced out by an increase in affiliate (essentially international) revenues, which climbed 2% to $1.14 billion. These results are nothing to write home about, but they aren't terrible, either. All the more, when looking at the situation holistically and holding shares up to the light of its enviable brands and good-not-great recent financial results, shares become increasingly attractive when one reflects on their current valuation.

VIAB PE Ratio (TTM) Chart

VIAB PE Ratio (TTM) data by YCharts.

Should Viacom be able to right the ship, investors will more than likely be handsomely rewarded given the stock's historically low valuation. Here, the situation appears to be positive as well. Management is no longer distracted by the drama surrounding the departure of Sumner Redstone and will be able to focus on international expansion of its brands. Also, Paramount Studios has recently been given a "booster shot" of sorts via a $1 billion dollar, 3-year deal by Chinese film studios Shanghai Film Group and Huahua Media. The cash infusion, coupled with the potential for allowing Paramount to make strong inroads into the fast-growing Chinese film market all bode well. These facts are perhaps why analysts polled by S&P Global Market Intelligence think Viacom's EPS will likely grow from $3.85 per share in FY 2017 to a respectable $5.26 per share (an annualized 8% annualized increase). 

A few words of caution

The world continues to change, and while few could have imagined Viacom's reach 30 years ago, the same could have been said of potential threats to its core entertainment brands. The fact is, the company faces threats from all quarters, from individuals in their homes posting comedic videos on YouTube to Time Warner's HBO. Consumers only have so many hours in the day, and fantastic content is now everywhere they turn. Viacom likely has what it takes to continue to compete and garner viewers' eyeballs and attention -- but the ever-present risk that the company will slowly be overtaken is there.

Foolish final thoughts

It appears that now is a rare time to buy into a fantastic media enterprise at a time when its shares are trading hands at a historically low valuation. True, its competitive position isn't what it used to be, and yes, the company has been mired in an ugly battle for control that was only recently resolved. But these negatives should not detract from the company's one-of-a-kind media properties, nor its attractive valuation that brings with it a 1.8% dividend yield to boot. Overall, Viacom's shares are worthy of strong consideration by Foolish investors with an eye to the future. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sean O'Reilly has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GOOG, GOOL, and Walt Disney. The Motley Fool recommends Time Warner. The Motley Fool has a disclosure policy.