Fox Corp (FOXA, Financial) has recently witnessed a daily gain of 2.55%, contrasting a 3-month loss of 6.59%. With an Earnings Per Share (EPS) (EPS) of 2.32, the stock appears to be modestly undervalued. This article delves into the valuation analysis of Fox, providing insightful details to aid informed investment decisions. Read on to discover more about Fox's intrinsic value.
Company Introduction
Fox represents the assets not sold to Disney by the 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.
At its current price of $32.16 per share, Fox has a market cap of $15.10 billion and is believed to be modestly undervalued compared to its GF Value of $40.71. Here is the income breakdown of Fox:
Summarizing GF Value
The GF Value represents the current intrinsic value of a stock. It is computed based on 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.
Fox (FOXA, Financial) stock is believed to be modestly undervalued based on the GF Value calculation. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
A company's financial strength is a critical aspect to consider before deciding to purchase shares. Fox has a cash-to-debt ratio of 0.52, which ranks worse than 62% of 1000 companies in the Media - Diversified industry. The overall financial strength of Fox is 6 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Fox has been profitable 8 over the past 10 years. Its operating margin is 18.53%, which ranks better than 88.59% of 1017 companies in the Media - Diversified industry. Overall, GuruFocus ranks the profitability of Fox at 8 out of 10, indicating strong profitability.
Another crucial factor in the valuation of a company is its growth. The average annual revenue growth of Fox is 12%, which ranks better than 79.48% of 955 companies in the Media - Diversified industry. The 3-year average EBITDA growth is 11.5%, which ranks better than 61.33% of 768 companies in the Media - Diversified industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method of determining its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Fox's return on invested capital is 12.23, and its cost of capital is 5.95.
Conclusion
Overall, Fox (FOXA, Financial) stock is believed to be modestly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 61.33% 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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