Is News Corp (NWS) Stock Fairly Valued? An In-depth Analysis

Understanding the intrinsic value and market performance of News Corp (NWS)

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News Corp (NWS, Financial) has recently experienced a daily gain of 4.73%, with a significant three-month gain of 28.88%. The company's Earnings Per Share (EPS) stands at 0.47. This raises an important question for investors and potential shareholders: is the stock fairly valued? This article aims to provide a comprehensive analysis to answer that question. Keep reading to explore the valuation of News Corp (NWS) in detail.

Company Overview

News Corporation, widely recognized as News Corp (NWS, Financial), is a diversified media conglomerate with significant presence in the U.S, the U.K., and Australia. The company's key brands include The Wall Street Journal, Herald Sun, and The Times. News Corp (NWS) also holds a strong position in the Australian pay-TV market through Fox Sports and Foxtel (both 65%-owned). The company's 61%-owned REA Group is the dominant real estate classified business in Australia. Furthermore, it owns HarperCollins, one of the largest book publishers globally, and has a substantial digital property advertising business (Move) in the U.S.


Understanding GF Value

The GF Value is an exclusive measure that represents the current intrinsic value of a stock. The GF Value Line on our summary page provides an overview of the stock's fair value. It is calculated based on three key factors:

  1. Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
  2. GuruFocus adjustment factor based on the company's past returns and growth.
  3. Future estimates of the business performance.

If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.

At its current price of $21.69 per share, News Corp (NWS, Financial) has a market cap of $12.20 billion. Based on our GF Value estimation method, the stock appears to be fairly valued. As News Corp (NWS) is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.


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Assessing Financial Strength

Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before purchasing shares. The cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength. News Corp (NWS, Financial) has a cash-to-debt ratio of 0.4, which ranks worse than 68.42% of companies in the Media - Diversified industry. The overall financial strength of News Corp (NWS) is 6 out of 10, which indicates fair financial strength.


Profitability and Growth

Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. News Corp (NWS, Financial) has been profitable 6 times over the past 10 years. Over the past twelve months, the company had a revenue of $10.10 billion and Earnings Per Share (EPS) of $0.47. Its operating margin is 6.67%, which ranks better than 62.28% of companies in the Media - Diversified industry. Overall, GuruFocus ranks the profitability of News Corp (NWS) at 6 out of 10, indicating fair profitability.

Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long-term stock performance of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of News Corp (NWS, Financial) is 0.8%, which ranks better than 53.18% of companies in the Media - Diversified industry. The 3-year average EBITDA growth rate is 14%, which ranks better than 64.08% of companies in the Media - Diversified industry.


Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, News Corp (NWS, Financial)'s ROIC was 4.93, while its WACC came in at 9.69.



Overall, News Corp (NWS, Financial) stock appears to be fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 64.08% of companies in the Media - Diversified industry. To learn more about News Corp (NWS) stock, you can check out its 30-Year Financials here.

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I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.