With a daily loss of 1.44% and a 3-month gain of 10.58%, Fox Corp (FOXA, Financial) has an Earnings Per Share (EPS) (EPS) of 2.32. This raises the question: is Fox Corp (FOXA) modestly undervalued? This article aims to provide a detailed valuation analysis of the company, offering insights into its financial health and growth prospects. Read on to discover more.
Company Overview
Fox Corp (FOXA, Financial) represents the assets not sold to Disney by predecessor firm, Twenty First Century Fox in 2019. The remaining assets include Fox News, the FOX broadcast network, FS1 and FS2, Fox Business, Big Ten Network, 28 owned and operated local television stations of which 17 are affiliated with the Fox Network, Tubi, and the Fox Studios lot. The Murdoch family continues to control the successor firm, which represents a large-scale bet on the value of live sports and news in the U.S. market.
Currently, the stock price stands at $34.15, while the GF Value, an estimation of its fair value, is $40.65. This comparison suggests that Fox Corp (FOXA, Financial) might be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Considering these factors, Fox Corp (FOXA, Financial) appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Hence, it is essential to review a company's financial strength before deciding to buy shares. Fox Corp (FOXA, Financial) has a cash-to-debt ratio of 0.51, which ranks worse than 64.43% of companies in the Media - Diversified industry. Based on this, GuruFocus ranks Fox's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. Fox Corp (FOXA, Financial) has been profitable for 7 out of the past 10 years. Over the past twelve months, the company had a revenue of $14.90 billion and Earnings Per Share (EPS) of $2.32. Its operating margin is 18.79%, which ranks better than 89.49% of companies in the Media - Diversified industry. Overall, GuruFocus ranks Fox's profitability at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. Fox's 3-year average annual revenue growth is 10.2%, which ranks better than 77.24% of companies in the Media - Diversified industry. However, the 3-year average EBITDA growth rate is 0.2%, which ranks worse than 56.07% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) is another way to assess its profitability. For the past 12 months, Fox's ROIC is 12.33, and its WACC is 6.09, indicating a healthy financial performance.
Conclusion
In summary, Fox Corp (FOXA, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 56.07% of companies in the Media - Diversified industry. To learn more about Fox stock, you can check out its 30-Year Financials here.
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