The debate that is going on in my mind is whether Murdoch is overpaying for Dow Jones. The first thought that came to mind when I heard the offer on television was a) Murdoch is paying to high of a premium b) investment return on Dow Jones’s newspaper assets (Wall Street Journal and Barons) are sure to decline as time passes. At a 5 billion market cap Dow Jones trades 14 times earnings (ttm) and 33 times estimated 2008 earnings! Similarly, Google (GOOG) currently trades at 26 times estimated 2008 earnings. So what is wrong with the picture? Google’s earnings are growing at an expeditious pace while Dow Jone’s growth rate is “ho-hum.”
On the other hand, it is tough to put a value on the Wall Street Journal. I mean, it is the Wall Street Journal. The Wall Street Journal is the second most important newspaper only behind the New York Times (NYT) and without a doubt the most important financial news source in the world. In the meantime, I can only guess at what happens next while waiting for the outcome.
Disclaimer: I do not own any of the companies mentioned in this article