News Corp (NWSA, Financial) has recently experienced a daily loss of 1.74%, though it has gained 3.57% over the past three months. With an Earnings Per Share (EPS) of $0.27, investors are keen to determine if the stock is fairly valued. This article delves into the intricacies of News Corp's valuation, providing a detailed analysis to help investors make informed decisions.
Company Introduction
News Corp, a diversified media conglomerate, commands a significant presence across the U.S., the U.K., and Australia. Renowned brands under its umbrella include The Wall Street Journal, Herald Sun, and The Times. It also boasts a 65% ownership in both Fox Sports and Foxtel, positioning it strongly in the Australian pay-TV market. Additionally, with a 61% stake in REA Group, News Corp leads the real estate classified business in Australia. The company's portfolio extends to HarperCollins, a top global book publisher, and a robust digital property advertising business (Move) in the U.S. With a current stock price of $20.92 and a GF Value of $20.1, we embark on a journey to assess News Corp's intrinsic value and market position.
Summarize GF Value
The GF Value is an exclusive evaluation indicating the intrinsic worth of a stock, integrating historical trading multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future business performance forecasts. When a stock's price hovers significantly above the GF Value Line, it may be overvalued, predicting poorer future returns. Conversely, if it lies below, the stock might be undervalued, suggesting higher future returns. With a market cap of $12.10 billion and a price per share of $20.92, News Corp (NWSA, Financial) is considered to be fairly valued according to GuruFocus' valuation method.
Given its fair valuation, the expected long-term return on News Corp's stock should align closely with the company's business growth rate.
Financial Strength Analysis
Investing in companies with robust financial strength is crucial to avoid the risk of permanent capital loss. News Corp's cash-to-debt ratio stands at 0.44, positioning it lower than 64.78% of competitors in the Media - Diversified industry. This earns News a financial strength rating of 6 out of 10 from GuruFocus, indicating a fair balance sheet. The historical data on News Corp's debt and cash flow further illustrate its financial trajectory.
Profitability and Growth Prospects
Investing in profitable companies, especially those with a consistent track record, generally presents less risk. News Corp has maintained profitability for 6 out of the past 10 years. The past year's revenue reached $9.90 billion with an Earnings Per Share (EPS) of $0.27 and an operating margin of 7.15%, outperforming 63.02% of its industry peers. News Corp's profitability is ranked 6 out of 10, reflecting fair profitability. However, its growth, indicated by a 3-year average revenue growth rate better than 61.03% of the industry, contrasts with a 3-year average EBITDA growth rate of 0%, which ranks lower than the industry average.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insight into its profitability and value creation. News Corp's ROIC over the past 12 months is 2.79%, while its WACC is 9%, suggesting that the company is not currently generating value beyond its capital costs. The historical comparison of News Corp's ROIC and WACC underscores this point.
Conclusion
Overall, News Corp (NWSA, Financial) is deemed to be fairly valued. The company exhibits fair financial health and profitability, yet its growth ranks unfavorably compared to industry counterparts. For a deeper understanding of News Corp's financials, investors 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.
