Fox Corp (FOXA, Financial) recently experienced a day's loss of -1.63% and a 3-month loss of -4.54%. Despite these figures, the company's Earnings Per Share (EPS) (EPS) stands at 2.04. The question now is, given these metrics, is Fox's stock modestly undervalued? This article aims to answer that question through a comprehensive valuation analysis. So, sit tight and join us on this financial exploration!
Understanding Fox Corp (FOXA, Financial)
Fox represents the assets not sold to Disney by predecessor firm, Twenty First Century Fox, in 2019. The remaining assets include Fox News, the FOX broadcast network, FS1 and FS2, Fox Business, Big Ten Network, 28 owned and operated local television stations of which 17 are affiliated with the Fox Network, Tubi, and the Fox Studios lot. Since the Disney sale, Fox has acquired other related and unrelated assets including Credible Labs, a consumer fintech firm. The Murdoch family continues to control the successor firm, which represents a large-scale bet on the value of live sports and news in the U.S. market.
Currently, Fox's stock price stands at $31.31, with a market cap of $14.50 billion. When compared to its GF Value of $41.58, it appears that Fox might be modestly undervalued.
Decoding 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 based on past returns and growth, and future business performance estimates. 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.
Based on this calculation, Fox's stock appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Analyzing Fox's Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before purchasing shares. One way to do this is by looking at the company's cash-to-debt ratio and interest coverage. Fox's cash-to-debt ratio stands at 0.47, which ranks worse than 63.32% of 1006 companies in the Media - Diversified industry. However, Fox's overall financial strength is 6 out of 10, indicating fair financial health.
Assessing Fox's Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Fox has been profitable 8 times over the past 10 years. Over the past twelve months, the company had a revenue of $14.90 billion and an EPS of $2.04. Its operating margin is 17.04%, which ranks better than 86.34% of 1032 companies in the Media - Diversified industry. Overall, the profitability of Fox is ranked 8 out of 10, indicating strong profitability.
Evaluating Fox's ROIC vs 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 exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Fox's ROIC was 11.19 while its WACC came in at 6.21.
Conclusion
In conclusion, Fox's stock appears to be modestly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 60.86% of 769 companies in the Media - Diversified industry. To learn more about Fox stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
