Fox Corp (FOX, Financial) has seen a daily gain of 2.44%, but a 3-month loss of 7.81%. Its Earnings Per Share (EPS) (EPS) stands at 2.32. However, the question that begs an answer is: Is the stock modestly undervalued? This comprehensive analysis aims to answer that question, providing an in-depth look at the company's valuation. We encourage you to follow through with the analysis to gain a better understanding of Fox's intrinsic value.
Company Overview
Fox 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. The company's stock price currently stands at $29.61, while its GF Value, an estimation of fair value, is $38.18.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on three factors: historical multiples that the stock has traded at, GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
According to GuruFocus' valuation method, the stock of Fox (FOX, Financial) is believed to be modestly undervalued. The GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $29.61 per share, Fox stock is believed to be modestly undervalued.
Because Fox is relatively undervalued, 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 has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Fox has a cash-to-debt ratio of 0.52, which is worse than 62% of 1000 companies in the Media - Diversified industry. GuruFocus ranks the overall financial strength of Fox at 6 out of 10, which indicates that the financial strength of Fox is fair.
Profitability and Growth
Profitability is a critical factor to consider before investing in a company. Fox has been profitable for 8 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 18.53%, which ranks better than 88.59% of 1017 companies in the Media - Diversified industry. Overall, the profitability of Fox is ranked 8 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. The 3-year average annual revenue growth rate of Fox is 12%, which ranks better than 79.48% of 955 companies in the Media - Diversified industry. The 3-year average EBITDA growth rate is 11.5%, which ranks better than 61.33% of 768 companies in the Media - Diversified industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital (ROIC) and the weighted cost of capital (WACC). For the past 12 months, Fox's return on invested capital is 12.23, and its cost of capital is 5.95.
Conclusion
In summary, the stock of Fox (FOX, Financial) 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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