Media Entertainment Stocks

Twenty-First Century Fox Inc Valuation – November 2016 $FOXA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Twenty-First Century Fox Inc (FOXA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Twenty-First Century Fox, Inc. is a media and entertainment company. The Company’s segments include Cable Network Programming; Television; Filmed Entertainment, and Other, Corporate and Eliminations. The Cable Network Programming segment produces and licenses news, business news, sports, general entertainment, factual entertainment and movie programming for distribution. The Television segment is engaged in the operation of broadcast television stations and the broadcasting of network programming in the United States. The Filmed Entertainment segment is engaged in the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media, and the production and licensing of television programming around the world. The Other, Corporate and Eliminations segment consists primarily of corporate overhead and eliminations, and other businesses.

FOXA Chart

FOXA data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

moderngraham-valuation-of-foxa-november-2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $50,905,446,532 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.01 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 377.85% Pass
6. Moderate PEmg Ratio PEmg < 20 12.31 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.70 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.01 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.54 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

foxa-value-chart-november-2016

EPSmg $2.23
MG Growth Estimate 9.08%
MG Value $59.34
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $32.28
MG Value based on 0% Growth $18.92
Market Implied Growth Rate 1.90%
Current Price $27.40
% of Intrinsic Value 46.17%

Twenty-First Century Fox Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.39 in 2013 to an estimated $2.23 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.9% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Twenty-First Century Fox Inc revealed the company was trading above its Graham Number of $17.36. The company pays a dividend of $0.33 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 12.31, which was below the industry average of 40.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.68.

Twenty-First Century Fox Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

foxa-charts-november-2016

Net Current Asset Value (NCAV) -$10.68
Graham Number $17.36
PEmg 12.31
Current Ratio 2.01
PB Ratio 3.70
Current Dividend $0.33
Dividend Yield 1.20%
Number of Consecutive Years of Dividend Growth 4

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Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/16/2016
Total Current Assets $14,921,000,000
Total Current Liabilities $7,422,000,000
Long-Term Debt $19,034,000,000
Total Assets $48,626,000,000
Intangible Assets $19,454,000,000
Total Liabilities $34,819,000,000
Shares Outstanding (Diluted Average) 1,863,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.80
Jun2016 $1.42
Jun2015 $3.90
Jun2014 $1.99
Jun2013 $3.03
Jun2012 $0.47
Jun2011 $1.04
Jun2010 $0.97
Jun2009 -$1.29
Jun2008 $1.81
Jun2007 $1.14
Jun2006 $0.76
Jun2005 $0.73
Jun2004 $0.58
Jun2003 $0.31
Jun2002 -$2.74
Jun2001 -$0.56
Jun2000 $0.76
Jun1999 $0.48
Jun1998 $0.57
Jun1997 $0.31

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.23
Jun2016 $2.35
Jun2015 $2.57
Jun2014 $1.77
Jun2013 $1.39
Jun2012 $0.58
Jun2011 $0.66
Jun2010 $0.54
Jun2009 $0.43
Jun2008 $1.20
Jun2007 $0.83
Jun2006 $0.42
Jun2005 $0.06
Jun2004 -$0.30
Jun2003 -$0.61
Jun2002 -$0.81
Jun2001 $0.21

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Defensive Investor – July 2016
10 Most Undervalued Companies for the Defensive Investor – July 2016
10 Low PE Stocks for the Defensive Investor – May 2016
10 Most Undervalued Companies for the Defensive Investor – May 2016
10 Most Undervalued Companies for the Defensive Investor – February 2016

Other ModernGraham posts about related companies

Twenty-First Century Fox Inc Valuation – August 2016 $FOXA
Discovery Communications Inc Valuation – August 2016 $DISCA
Scripps Networks Valuation – July 2016 $SNI
Cablevision Systems Corp Valuation – July 2016 $CVC
Time Warner Inc Valuation – July 2016 $TWX
Comcast Corporation Valuation – June 2016 $CMCSA
Viacom Inc Valuation – June 2016 $VIAB
CBS Corporation Valuation – May 2016 $CBS
Graham Holdings Company Valuation – May 2016 $GHC
Twenty-First Century Fox Inc Valuation – February 2016 Update $FOXA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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