Is News Corp (NWSA) Set to Underperform? Analyzing the Factors Limiting Growth

Understanding the Barriers to Outperformance for News Corp (NWSA)

Long-established in the Media - Diversified industry, News Corp (NWSA, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.5%, juxtaposed with a three-month change of 7.15%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of News Corp.

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What Is the GF Score?

The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.

Based on the above method, GuruFocus assigned News Corp the GF Score of 69 out of 100, which signals poor future outperformance potential.

Understanding News Corp's Business

News Corp (NWSA, Financial) is a diversified media conglomerate with a market cap of $12.66 billion and sales of $9.9 billion. With an operating margin of 7.35%, the company has a significant presence in the U.S, the U.K., and Australia. Key mastheads include The Wall Street Journal, Herald Sun, and The Times. The company also has a strong presence in the Australian pay-TV market through Fox Sports and Foxtel (both 65%-owned), while its 61%-owned REA Group is the dominant real estate classified business in Australia. In addition, it owns HarperCollins, one of the largest book publishers in the world, and also has a substantial digital property advertising business (Move) in the U.S.

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Growth Prospects

A lack of significant growth is another area where News Corp seems to falter, as evidenced by the company's low Growth rank. The media industry is rapidly evolving, and News Corp's traditional stronghold in print and pay-TV is being challenged by digital transformation and changing consumer behaviors. This shift necessitates strategic innovation and investment in digital platforms, which may not yet be fully reflected in News Corp's growth metrics.

Lastly, News Corp's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.

Next Steps

Considering News Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a robust portfolio of media assets, the evolving landscape requires agility and innovation, which may not be sufficiently captured in the current valuation. Investors should closely monitor the company's strategic moves and industry trends to assess whether News Corp can pivot effectively to address these challenges.

GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.

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.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure