News Corp (NWSA, Financial) has seen a daily gain of 4.58%, with a 3-month gain of 26.88%. The company's Earnings Per Share (EPS) stands at 0.47. The question that arises is: Is the stock fairly valued? This article sets out to answer this question through a comprehensive valuation analysis. Read on for a deeper understanding of News Corp's intrinsic value.
Company Overview
News Corporation, commonly known as News Corp (NWSA, Financial), is a diversified media conglomerate with a significant presence in the U.S, the U.K., and Australia. Some of its key brands include The Wall Street Journal, Herald Sun, and The Times. The company also dominates the Australian pay-TV market through Fox Sports and Foxtel (both 65%-owned). Its 61%-owned REA Group is the leading real estate classified business in Australia. In addition, it owns HarperCollins, one of the largest book publishers globally, and has a substantial digital property advertising business (Move) in the U.S.
News Corp's current stock price is $21.24, with a market cap of $12.20 billion. When compared to the GF Value of $19.83, the stock appears to be fairly valued.
Understanding the GF Value
The GF Value is a measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
News Corp (NWSA, Financial), according to GuruFocus Value calculation, appears to be fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before purchasing shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. News Corp has a cash-to-debt ratio of 0.4, ranking worse than 68.42% of companies in the Media - Diversified industry. The overall financial strength of News Corp is 6 out of 10, indicating fair financial strength.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. News Corp has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $10.10 billion and an 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, the profitability of News Corp is ranked 6 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. News Corp's 3-year average revenue growth rate is better than 53.18% of companies in the Media - Diversified industry. News Corp's 3-year average EBITDA growth rate is 14%, which ranks better than 64.08% of companies in the Media - Diversified industry.
ROIC vs WACC
Another way to assess a company's profitability is to compare its return on invested capital (ROIC) with the weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, News Corp's ROIC is 4.93, and its WACC is 9.69.
Conclusion
In summary, the stock of News Corp (NWSA, Financial) 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 stock, you can check out its 30-Year Financials here.
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