Despite a daily loss of 5.8% and a 3-month loss of 0.69%, Fox Corp (FOX, Financial) maintains an Earnings Per Share (EPS) (EPS) of 2.32. The question is, does this indicate that the stock is modestly undervalued? In this analysis, we'll take a deep dive into the financials and operations of Fox Corp to answer this question. Keep reading to gain a comprehensive understanding of Fox's valuation.
Company Overview
Fox Corp (FOX, Financial) represents the assets not sold to Disney by its 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, Tubi, and the Fox Studios lot. Since the Disney sale, Fox has acquired other related and unrelated assets including Credible Labs, a consumer fintech firm. 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.
At its current price of $28.75 per share and a market cap of $14.60 billion, Fox's stock appears to be modestly undervalued when compared to its GF Value of $38.17.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on three factors: historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
According to our calculations, Fox (FOX, Financial) appears to be modestly undervalued. If the price of a stock is significantly above the GF Value Line, it is considered 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. Given Fox's current position, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. It's crucial to review a company's financial strength before deciding to buy its stock. Fox's cash-to-debt ratio of 0.52 is lower than 62.51% of 1003 companies in the Media - Diversified industry, indicating fair financial strength.
Profitability and Growth
Profitable companies, especially those with consistent profitability over the long term, are generally safer investments. Fox has been profitable 8 out of the past 10 years, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. Fox's 3-year average annual revenue growth rate is 12%, which ranks better than 79.73% of 957 companies in the Media - Diversified industry. Its 3-year average EBITDA growth rate is 11.5%, ranking better than 61.2% of 768 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate a company's profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Fox's ROIC has been 12.23 while its WACC came in at 5.96.
Conclusion
In conclusion, Fox Corp (FOX, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 61.2% of 768 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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