Like most value investors, I frequently find it difficult to justify “paying up” for growth. A challenging stock market during the past couple of years has provided ample opportunity to find stocks that are trading at ridiculously low levels. But now that the market has rallied strongly for nearly two years now, it means that bargains are harder to come by. As such, the timing is good to start focusing on the growth side of the equation, meaning companies that can expand their sales and profits at an above-average clip.

I’ve been hunting around the media space as of late and have been intrigued by Discovery Communications Inc. (Nasdaq: DISCA) (Nasdaq: DISCB) (Nasdaq: DISCK), which just turned on a new and exciting cable channel, OWN, that could propel growth. [See: “5 Media Stocks That Could Win in the Digital Age”]

The channel is a joint venture with Oprah Winfrey, the daytime talk queen with a habit of turning everything she touches into gold. The proof is in her net worth, which is currently estimated at about $2.7 billion and is largely the result of Harpo Studios, which has created big stars out of self-help personalities such as Dr. Phil and Dr. Oz.

Oprah has been in negotiations with Discovery about creating a joint venture for her own cable channel since 2007. Over the New Year weekend, the wait finally ended as the Oprah Winfrey Network was launched. Oprah has committed to appearing on OWN for 70 hours each year, which is double an earlier agreement with Discovery and replaces all of the programming she created at Harpo.

At this point, the potential of OWN is mostly hype and few analysts have put any financial projections from the network into their earnings models. This is both bad and good. It’s bad because it means few tangible signs exist with which to estimate the value of OWN. On the flip side, this is a good thing because it means the spoils can go to those willing to estimate the upside potential on Discovery’s stock price.

Here are some financial facts about the network that are concrete. Discovery spent almost $200 million building the channel to develop programming, studio space and related build-out costs. Oprah’s previous flagship talk show averaged 6.5 million viewers, and the OWN channel is available in an estimated 85 million homes.

Discovery replaced its Discovery Health channel with OWN and has already generated $200 million in advertising commitments, which is up from an estimated $60 million under the old channel. From this standpoint, there is upside: Discovery Health was barely profitable, with sales of less than $150 million in 2007.

Within a few years, OWN is estimated to bring in a profit of more than $100 million a year. Some estimates peg the channel to be worth $3 billion or more within this timeframe. In other words, OWN could grow into a leader among Discovery’s channels (which include TLC, Animal Planet, the namesake Discovery channel and FitTV).

Discovery makes its money by charging advertising and running commercials during its shows. It also charges cable companies for distribution. The company is also one of the fastest-growing media names internationally, with a third of sales stemming from overseas. Oprah’s potential is also global and could mean even further upside to the current estimates on its value to Discovery. 

Action to Take –> Overall, there is significant upside for Discovery shareholders from the OWN channel. Management’s goal is to double the performance of Discovery Health, and this would make OWN the most successful channel in Discovery’s stable. OWN could help the firm report well over $4 billion in annual sales and could also push net profit margins to even more impressive levels, (above 20%) from about 19% currently.

All else being equal, the OWN network venture could add 15% or more to the market value of Discovery Communications’s shares if the channel’s value hits $5 billion within five years. Of course, Discovery’s other channels will continue to grow both domestically and internationally, and there could also be the potential to acquire Oprah’s stake or develop additional channels with her, all of which could mean further upside and double-digit annual returns for shareholders in the coming years.