News Corp (NWS, Financial) has recently shown a daily gain of 2.1% and an 8.59% gain over the past three months. With an Earnings Per Share (EPS) of $0.25, investors are keen to determine if the stock is fairly valued. This article delves into the valuation analysis of News Corp, providing an insightful look into whether its current market price reflects its intrinsic value. Read on for an in-depth analysis of News Corp's financial strength, growth prospects, and overall value proposition.
Company Introduction
News Corporation is a giant in the media world, boasting a diversified portfolio that includes The Wall Street Journal, Herald Sun, and The Times. With a strong foothold in the Australian pay-TV market through Fox Sports and Foxtel, and a dominant online real estate presence via REA Group, News Corp is a multifaceted conglomerate. Its publishing arm, HarperCollins, stands as one of the world's largest book publishers. Additionally, News Corp owns Move, a significant player in the U.S. digital property advertising space. The current stock price of $22.94 is juxtaposed against the GF Value of $21.74, prompting a discussion on whether News Corp is trading at a fair valuation.
Summarize GF Value
The GF Value is a unique measure that determines the intrinsic value of a stock. It incorporates historical trading multiples, an adjustment factor based on past performance, and future business performance projections. For News Corp (NWS, Financial), the GF Value suggests that the stock is fairly valued at its current price, with a market cap of $12.70 billion. The valuation indicates that the long-term return of News Corp's stock is likely to mirror the company's business growth rate, assuming the market conditions remain constant.
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Financial Strength
Investors must scrutinize a company's financial strength to avoid potential capital loss. News Corp's cash-to-debt ratio of 0.37 places it lower than 68.02% of its peers in the Media - Diversified industry. This ratio, combined with other financial metrics, leads to a GuruFocus financial strength ranking of 6 out of 10, indicating a reasonably healthy balance sheet.
Profitability and Growth
Profitability is a cornerstone of investment safety. News Corp has maintained profitability for 6 out of the past 10 years, with a revenue of $9.90 billion and an Earnings Per Share (EPS) of $0.25 over the last twelve months. The company's operating margin of 7.35% is commendable, ranking well within its industry. Growth is equally crucial for valuation. News Corp's 3-year average revenue growth outperforms 61.05% of competitors, although its EBITDA growth rate has not shown significant progress.
ROIC vs WACC
Comparing the Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) is another way to gauge profitability. News Corp's ROIC of 2.84 is currently below its WACC of 9, suggesting that the company is not creating value for shareholders as effectively as it could.
Conclusion
In conclusion, News Corp (NWS, Financial) appears to be fairly valued based on current estimates. The company's financial condition and profitability are stable, although its growth and value creation potential could be improved. For a more detailed financial overview of News Corp, interested parties can examine 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.
