As of September 21, 2023, Fox Corp (FOX, Financial) experienced a daily gain of 2.09%, despite a 3-month loss of -6.61%. With an Earnings Per Share (EPS) (EPS) of 2.32, the question arises: Is the stock modestly undervalued? This article will provide a comprehensive analysis of Fox Corp's valuation, encouraging readers to delve into the details that follow.
A Snapshot of Fox Corp (FOX, Financial)
Fox Corp 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, 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.
With a current stock price of $29.33 and a market cap of $15 billion, Fox Corp (FOX, Financial) is believed to be modestly undervalued according to the GF Value, our proprietary estimate of the fair value at which the stock should be traded.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated 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.
According to our analysis, Fox (FOX, Financial) is estimated to be modestly undervalued. Given this, the long-term return of its stock is likely to be higher than its business growth.
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Fox Corp's Financial Strength
Before investing, it is crucial to assess a company's financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Fox's cash-to-debt ratio of 0.52 is lower than 62.45% of 1004 companies in the Media - Diversified industry, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies is less risky, especially those that have consistently demonstrated profitability over the long term. Fox has been profitable 8 years over the past 10 years, with revenues of $14.90 billion and an EPS of $2.32 in the past 12 months. Its operating margin of 18.53% is better than 88.34% of 1038 companies in the Media - Diversified industry, indicating strong profitability.
Growth is a critical factor in the valuation of a company. Fox's 3-year average annual revenue growth of 12% ranks better than 79.58% of 955 companies in the Media - Diversified industry. Its 3-year average EBITDA growth rate is 11.5%, which ranks better than 61.74% of 771 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 evaluate its profitability. Fox's ROIC is 12.23, higher than its WACC of 6, indicating effective cash flow generation relative to the capital invested in its business.
Conclusion
In conclusion, Fox (FOX, Financial) stock is estimated to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 61.74% of 771 companies in the Media - Diversified industry. To learn more about Fox stock, check out its 30-Year Financials here.
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