As of July 19, 2023, Paramount Global (PARA, Financial) has seen a price change of 3.35%, with a stock price of $16.04. The company boasts a market cap of $10.6 billion and sales of $30.1 billion. However, the GuruFocus Value (GF Value) stands at $33.22, suggesting that the stock might be a potential value trap.
Paramount Global is a media conglomerate with a global reach, formed from the recombination of CBS and Viacom. The company operates a host of leading cable network properties, including Nickelodeon, MTV, BET, Comedy Central, VH1, CMT, and Paramount. Paramount Pictures, a subsidiary, produces original motion pictures and owns a library of 2,500 films. Paramount also operates several streaming services, most notably Paramount+ and Pluto TV.
Paramount Global's Valuation
Based on the GuruFocus Value calculation, Paramount Global's stock appears to be a possible value trap. The GF Value is an estimate of the fair value at which the stock should ideally be traded. It is calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Paramount Global's Piotroski F-score is only 2 out of a total of 9, indicating the company is declining in multiple aspects in the areas of profitability, funding, and efficiency. Additionally, Paramount Global has an Altman Z-score of 1.09, indicating a higher risk of bankruptcy.
Paramount Global's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, investors must carefully review a company’s financial strength before deciding whether to buy shares. Paramount Global has a cash-to-debt ratio of 0.12, which ranks worse than 84.96% of companies in the Media - Diversified industry. GuruFocus ranks Paramount Global’s financial strength as 4 out of 10, suggesting a poor balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Paramount Global has been profitable 10 times over the past 10 years. Over the past twelve months, the company had a revenue of $30.1 billion and EPS of $-0.78. Its operating margin is 2.47%, which ranks worse than 52.61% of companies in the Media - Diversified industry.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Paramount Global is 2%, which ranks better than 56.15% of companies in the Media - Diversified industry. The 3-year average EBITDA growth is -18.9%, which ranks worse than 79.4% of companies in the Media - Diversified industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. For the past 12 months, Paramount Global’s return on invested capital is 1.14, and its cost of capital is 6.87.
Conclusion
In conclusion, the stock of Paramount Global (PARA, Financial) appears to be a potential value trap. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 79.4% of companies in the Media - Diversified industry. To learn more about Paramount Global stock, you can check out its 30-Year Financials here.
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