News Corp (NWSA, Financial) has recently experienced a daily gain of 2.33% and a 3-month gain of 6.75%, with an Earnings Per Share (EPS) of $0.25. Investors are keen to determine whether these figures reflect a stock that is fairly valued. This article aims to delve into the valuation analysis of News Corp, providing investors with a comprehensive understanding of its fair market positioning. Read on for a detailed exploration of News Corp's intrinsic value and financial health.
Company Overview
News Corporation is a media titan with a diversified portfolio that spans across major markets such as the U.S., the U.K., and Australia. Its influential brands include The Wall Street Journal, Herald Sun, and The Times. Moreover, News Corp holds a strong foothold in the Australian pay-TV market with Fox Sports and Foxtel, and dominates the real estate classified sector through its majority ownership in REA Group. The conglomerate also owns HarperCollins, a top player in the global publishing industry, and maintains a significant digital real estate advertising presence in the U.S. with Move. With a current stock price of $22.01 and a GF Value of $20.9, we set out to examine if News Corp stands at a fair valuation.
Deciphering the GF Value
The GF Value is a unique metric that captures the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and projections of future business performance. This GF Value Line serves as a benchmark, suggesting a fair trading value for the stock. When a stock trades significantly above this line, it may be overvalued and poised for poor future returns. Conversely, if it trades below, it could be undervalued, indicating potential for higher returns.
At a price of $22.01 per share, News Corp (NWSA, Financial) appears to be fairly valued according to the GF Value. This assessment is based on historical trading multiples, adjustments from past business growth, and future performance estimates. A stock price close to the GF Value Line suggests that the long-term return of News Corp's stock is likely to align with the company's business growth rate.
Financial Strength Assessment
A company's financial strength is critical in minimizing the risk of permanent capital loss. Investors should examine metrics such as the cash-to-debt ratio and interest coverage to gauge this strength. News Corp's cash-to-debt ratio stands at 0.37, which is lower than 68.02% of its peers in the Media - Diversified industry. With an overall financial strength rating of 6 out of 10, News Corp's financial health is deemed fair.
Profitability and Growth Perspectives
Investing in profitable companies is generally less risky, especially those with a history of consistent profitability. A company with high profit margins typically offers better performance potential. News Corp has been profitable for 6 out of the past 10 years, with revenues of $9.90 billion and an Earnings Per Share (EPS) of $0.25 in the last 12 months. Its operating margin of 7.35% is higher than 62.87% of its industry counterparts. GuruFocus ranks News Corp's profitability as fair.
Growth is a pivotal factor in a company's valuation, with a strong correlation to long-term stock performance. News Corp's 3-year average annual revenue growth rate of 3.7% fares better than 61.05% of companies in the Media - Diversified industry. However, its 3-year average EBITDA growth rate stands at 0%, falling behind its industry peers.
Return on Invested Capital vs. Weighted Average Cost of Capital
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Ideally, the ROIC should exceed the WACC. For the past 12 months, News Corp's ROIC is 2.84, which is below its WACC of 9, indicating that the company may not be generating sufficient returns on its investments.
Concluding Insights
In summary, News Corp (NWSA, Financial) appears to be fairly valued in the market. The company's financial condition and profitability are satisfactory, but its growth prospects are less impressive compared to industry benchmarks. To gain a deeper understanding of News Corp's financials, interested parties can explore 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.
