News Corp (NWSA, Financial) has recently experienced a daily loss of -1.74%, yet it has managed a 3.5% gain over the past three months. With an Earnings Per Share (EPS) of $0.27, investors are considering whether News (NWSA) is currently fairly valued. This article delves into a detailed valuation analysis of News Corp, providing insights into whether the current market price reflects the true worth of the company's stock.
Company Introduction
News Corporation, a diversified media conglomerate, boasts significant operations in the U.S., the U.K., and Australia. With prestigious mastheads like The Wall Street Journal and The Times, a strong presence in the Australian pay-TV market through Fox Sports and Foxtel, and ownership of the top book publisher HarperCollins, News Corp (NWSA, Financial) is a heavyweight in the media space. The company's digital real estate ventures, including the dominant REA Group in Australia and Move in the U.S., further solidify its market position. Comparing News (NWSA)'s current stock price of $20.92 to the GF Value of $20.79, we embark on a comprehensive analysis to determine the fairness of its valuation.
Summarize GF Value
The GF Value is a proprietary metric that calculates the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and analyst estimates of future business performance. The GF Value Line suggests a fair trading value for the stock. If the stock price considerably deviates from this line, it may indicate overvaluation or undervaluation, with corresponding implications for future returns. News (NWSA, Financial) appears to be fairly valued, suggesting that its long-term returns could closely align with the company's business growth rate.
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Financial Strength
Investing in companies with robust financial strength mitigates the risk of capital loss. Analyzing metrics like the cash-to-debt ratio and interest coverage offers insights into a company's financial resilience. News Corp's cash-to-debt ratio stands at 0.37, which is lower than 67.82% of its peers in the Media - Diversified industry. With a GuruFocus financial strength rank of 6 out of 10, News Corp's financial condition is deemed fair.
Profitability and Growth
Investing in consistently profitable companies, particularly those with high profit margins, is generally less risky. News Corp has been profitable for 6 out of the past 10 years, with a 12-month revenue of $9.90 billion and an Earnings Per Share (EPS) of $0.27. With an operating margin of 7.35%, News ranks above 63.57% of its industry counterparts. The company's overall profitability is rated 6 out of 10, indicating fair profitability.
The growth of a company is a pivotal factor in valuation. News Corp's 3-year average annual revenue growth rate of 3.7% surpasses 61.01% of companies in the Media - Diversified industry, though its EBITDA growth rate is not as competitive.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another way to gauge profitability. A higher ROIC compared to WACC indicates value creation for shareholders. For the past year, News Corp's ROIC is 2.84, which is lower than its WACC of 9.05, suggesting challenges in generating cash flow relative to capital invested.
Conclusion
In summary, News Corp (NWSA, Financial) is currently trading at a price that suggests it is fairly valued. The company exhibits a fair financial condition and profitability, although its growth rates could improve. For those interested in a deeper financial analysis of News Corp, the company's 30-Year Financials are available for review.
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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.
