At the Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
As summer looms, new programming on network television swoons. But that's not fazing Pali Research this week. The analyst just tuned into satellite television provider DirecTV Group (NYSE:DTV) and -- spoiler alert -- Pali thinks it's found a hit.

I mean, just listen to the rave review that Pali published yesterday: "Digital Channels, DVRs, [Tivo]-interface, HD Channels, and Remote Scheduling illustrate how DirecTV has been able to continuously innovate to stay ahead of its rivals... DirecTV only does one thing, video, and they simply do it better than others by putting the consumer first and 'super serving' video consumers in every way possible."

If that sounds to you like a jab at DTV tele-rivals like:

  • Comcast (NASDAQ:CMCSA) and Time Warner Cable -- erstwhile cable concerns that now do everything from Internet to phone service, or
  • Verizon (NYSE:VZ) and AT&T (NYSE:T) -- which likewise have gravitated to the "triple play" solution

-- well, then I think you and Pali are on the same channel.

Let's go to the tape
The good news here is that Pali seems to get better-than-average reception on its tele-picks. Prior to recommending DirecTV this week, Pali had 11 active picks in the media sector. Six of these were outperforming the market, including ...


Pali Says:

CAPS says:

Pali's Picks Beating S&P By:

Time Warner (NYSE:TWX)



11 points




2 points

... while five more were not, including:


Pali Says:

CAPS says:

Pali's Picks Lagging S&P By:

Disney (NYSE:DIS)



26 points

News Corp (NYSE:NWS)



33 points

But the good news doesn't stop there. Historically, Pali has done even better than the 54% accuracy implied by its six successful, active picks. Over the two-plus years that we've been tracking Pali's performance, this firm has racked up a record of 63% accuracy and 129 points of market outperformance in the media sector -- enough to make it a certified investment genius when compared to the host of investment bankers who can't outperform a coin flip.

And while I'm not convinced the analyst will be proven right on DirecTV, the odds seem to favor it. You see, DirecTV's stock looks a little pricey at first glance -- the P/E is just shy of 18, while the analyst consensus is to generally expect about 14% long-term growth out of the company.

Dig a little deeper, though, and you'll see that DirecTV's GAAP financials understate its true earning potential by a significant sum. While the stock's price to earnings may be just under 18, its price is closer to 14 times free cash flow.

Relative to the projected growth rate, that looks pretty darn attractive.

Foolish takeaway
I think I have to agree with Pali. DirecTV offers a decent path to profit.

Walt Disney is both a Stock Advisor selection and an Inside Value recommendation. To read why, take a free 30-day trial.

Fool contributor Rich Smith does not own (or hold a short position in) any stock named above -- and per the Fool's gold standard disclosure policy, cannot trade in any such stock for at least 10 days after this article posts. That's just how we roll at the Fool. You can find Rich on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 800 out of more than 135,000 members.