Manchester United PLC (MANU, Financial) recently experienced a daily loss of -18.22%, with a 7.26% gain over the last three months. However, the company reported a Loss Per Share of 0.71, raising questions about its valuation. Is the stock modestly overvalued? This article aims to provide an in-depth analysis of the company's valuation and financial performance.
A Brief Overview of Manchester United PLC
Manchester United PLC operates a professional football club along with related and ancillary activities. The company manages the soccer team and all affiliated club activities of the Manchester United Football Club. This includes the media network, foundation, fan zone, news, sports features, and team merchandise. Based in England, Manchester United generates the majority of its revenue from three principal sectors: Commercial, Broadcasting, and Matchday. With a current stock price of $19.35, the company has a market cap of $3.20 billion. However, our GF Value estimates the fair value at $16.99, suggesting that the stock might be modestly overvalued.
Understanding the GF Value
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor derived from past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is considered 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.
For Manchester United PLC, the GF Value suggests that the stock is modestly overvalued. Hence, the long-term return of its stock is likely to be lower than its business growth.
Assessing Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Thus, it's crucial to review a company's financial strength before deciding to buy its stock. The cash-to-debt ratio and interest coverage are good indicators of a company's financial strength. Manchester United PLC has a cash-to-debt ratio of 0.1, which is worse than 85.34% of the companies in the Media - Diversified industry. This indicates that the financial strength of Manchester United PLC is relatively poor.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Manchester United PLC has been profitable 5 times over the past 10 years. However, its operating margin of -12.9% ranks worse than 76.13% of the companies in the Media - Diversified industry. This indicates fair profitability .
Growth is a crucial factor in the valuation of a company. Faster-growing companies create more value for shareholders, especially if the growth is profitable. However, the 3-year average annual revenue growth of Manchester United PLC is -3%, which ranks worse than 57.47% of the companies in the Media - Diversified industry. The 3-year average EBITDA growth rate is -40.1%, which ranks worse than 91.28% of the companies in the same industry. This indicates relatively poor growth .
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) can provide insights into its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For Manchester United PLC, the ROIC is -4.14, and the WACC is 8.08, indicating a less favorable financial performance.
Conclusion
In conclusion, the stock of Manchester United PLC (MANU, Financial) is believed to be modestly overvalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 91.28% of the companies in the Media - Diversified industry. To learn more about Manchester United PLC stock, you can check out its 30-Year Financials here.
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