As of July 18, 2023, Live Nation Entertainment Inc (LYV, Financial) exhibits a notable stock price change with a closing price of $97.63, marking a 3.54% increase. The company's market capitalization stands at $22.4 billion. However, the GuruFocus Value (GF Value) estimates the company's intrinsic worth to be $233.63 per share, suggesting that the stock may be undervalued. This assessment of undervaluation is based on a combination of historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance.
Live Nation Entertainment, the world's largest live entertainment firm, served over 670 million fans in 48 countries in 2022. The company's extensive portfolio includes over 338 venues, one of the largest ticketing services, Ticketmaster, and artist management agencies with over 400 clients. Its broad live entertainment footprint has also made Live Nation one of the largest advertising and sponsorship platforms aimed at music fans. The company's significant stakeholder, Liberty Media, owns 31% of Live Nation, held under its SiriusXM tracking stock.
Valuation Analysis
According to GuruFocus Value calculation, the stock of Live Nation Entertainment (LYV, Financial) is estimated to be a possible value trap. This assessment is based on the significant disparity between the stock's current price and its GF Value. The company's financial condition, as indicated by an Altman Z-score of 1.66, is in the distressed zone, implying a higher risk of bankruptcy. A Z-score above 2.99 would indicate safer financial conditions. For more details on how the Z-score measures the financial risk of a company, please click here.
Financial Strength
Investing in companies with robust financial strength reduces the risk of permanent loss. One of the ways to gauge a company's financial strength is by examining its cash-to-debt ratio. Live Nation Entertainment's cash-to-debt ratio is 0.83, which is lower than 56.15% of companies in the Media - Diversified industry, indicating that the company's financial strength is fair.
Profitability
Profitability is a critical factor for investors. Live Nation Entertainment has been profitable over the past year, with a revenue of $18 billion and an EPS of $0.67. The company's operating margin is 4.52%, which ranks better than 54.04% of companies in the Media - Diversified industry. However, the overall profitability of Live Nation Entertainment is ranked 4 out of 10, indicating poor profitability.
Growth
Long-term stock performance is closely correlated with growth. Live Nation Entertainment's average annual revenue growth is 9.4%, which ranks better than 74.87% of companies in the Media - Diversified industry. The 3-year average EBITDA growth is 12.5%, which ranks better than 63.01% of companies in the Media - Diversified industry.
ROIC Vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Live Nation Entertainment's ROIC is 5.3, while its WACC is 10.2. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders.
Conclusion
In conclusion, the stock of Live Nation Entertainment (LYV, Financial) is estimated to be a possible value trap. The company's financial condition is fair, but its profitability is poor. However, its growth ranks better than 63.01% of companies in the Media - Diversified industry. To learn more about Live Nation Entertainment stock, you can check out its 30-Year Financials here.
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