News Corp Valuation – March 2019 #NWSA

Company Profile (excerpt from Reuters): News Corporation, incorporated on December 11, 2012, is a global diversified media and information services company focused on creating and distributing content to consumers and businesses throughout the world. The Company’s operations are organized into five segments: News and Information Services; Book Publishing; Digital Real Estate Services; Cable Network Programming, and Other. The Company comprises businesses across a range of media, including news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-television distribution in Australia, that are distributed under brands, including The Wall Street Journal, Dow Jones, The Australian, Herald Sun, The Sun, The Times, HarperCollins Publishers, FOX SPORTS Australia, realestate.com.au, realtor.com and Foxtel, among others. The Company also owns a stake in Foxtel, a pay-television provider in Australia, which is accounted for as an equity investment. The Company operates primarily in the United States, Australia and the United Kingdom, and its content is distributed and consumed across the world. The Company delivers its content to consumers across numerous distribution platforms consisting not only of traditional print and television, but also through an array of digital platforms, including Websites, applications for mobile devices and tablets, social media and e-book devices.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NWSA – March 2019

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 $7,577,227,483 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.19 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 46.47% Pass
6. Moderate PEmg Ratio PEmg < 20 -15.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.73 Fail
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 1.19 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.81
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$11.76
MG Value based on 0% Growth -$6.90
Market Implied Growth Rate -12.23%
Current Price $12.95
% of Intrinsic Value N/A

News Corp Class A does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $-0.2 in 2015 to an estimated $-0.81 for 2019. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into News Corp Class A revealed the company was trading above its Graham Number of $11.04. The company pays a dividend of $0.2 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was -15.96, which was below the industry average of 35.38, 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 $-2.32.

News Corp Class A scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.32
Graham Number $11.04
PEmg -15.96
Current Ratio 1.19
PB Ratio 0.73
Current Dividend $0.20
Dividend Yield 1.54%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,429,000,000
Total Current Liabilities $3,712,000,000
Long-Term Debt $936,000,000
Total Assets $16,227,000,000
Intangible Assets $7,796,000,000
Total Liabilities $5,793,000,000
Shares Outstanding (Diluted Average) 587,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.34
Jun2018 -$2.60
Jun2017 -$1.27
Jun2016 $0.30
Jun2015 -$0.26
Jun2014 $0.41
Jun2013 $0.87
Jun2012 -$3.58
Jun2011 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.81
Jun2018 -$1.15
Jun2017 -$0.28
Jun2016 -$0.01
Jun2015 -$0.20
Jun2014 -$0.19
Jun2013 -$0.43
Jun2012 -$0.88
Jun2011 $0.39

Recommended Reading:

Other ModernGraham posts about the company

News Corp Valuation – February 2017 $NWSA
5 Speculative and Overvalued Companies to Avoid – November 2015
News Corporation Valuation – November 2015 Update $NWSA
27 Companies in the Spotlight This Week – 11/8/14
News Corp Annual Valuation – 2014 $NWSA

Other ModernGraham posts about related companies

CBS Corp Valuation – February 2019 $CBS
Discovery Inc Valuation – February 2019 $DISCA
Comcast Corp Valuation – January 2019 $CMCSA
Viacom Inc Valuation – January 2019 $VIAB
Twenty-First Century Fox Inc Valuation – January 2019 $FOX
Walt Disney Co Valuation – November 2018 $DIS
Tegna Inc Valuation – August 2018 $TGNA
E.W. Scripps Co Valuation – August 2018 $SSP
Cinemark Holdings Inc Valuation – August 2018 $CNK
Corus Entertainment Inc Valuation – July 2018 $TSE:CJR.B

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.

News Corp Valuation – February 2017 $NWSA

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 – February 2017.  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 News Corp (NWSA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): News Corporation is a global diversified media and information services company focused on creating and distributing content to consumers and businesses throughout the world. The Company’s operations are organized into five segments: News and Information Services; Book Publishing; Digital Real Estate Services; Cable Network Programming, and Other. The Company’s News and Information Services segment consists primarily of Dow Jones, News Corp Australia (which includes News Limited and its subsidiaries), News UK, the New York Post and News America Marketing. Its Book Publishing segment consists of HarperCollins Publishers (together with its subsidiaries and affiliates, HarperCollins), which is a consumer book publisher. Its Digital Real Estate Services segment consists of its interest in REA Group Limited (REA Group), and its interest in Move, Inc. (Move). The Company’s Cable Network Programming segment consists of FOX SPORTS Australia, a sports programming provider in Australia.

NWSA Chart

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ModernGraham Valuation of NWSA – February 2017

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 $8,221,672,008 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.54 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1296.67% Fail
6. Moderate PEmg Ratio PEmg < 20 1,706.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.69 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 1.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.21 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $0.01
MG Growth Estimate 15.00%
MG Value $0.30
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $0.11
MG Value based on 0% Growth $0.07
Market Implied Growth Rate 848.79%
Current Price $13.08
% of Intrinsic Value 4431.39%

News Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings stability over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.43 in 2013 to an estimated $0.01 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 848.79% 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 below the price.

At the time of valuation, further research into News Corp revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.2 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 1706.09, which was above the industry average of 39.27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.03.

News Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.03
Graham Number $0.00
PEmg 1,706.09
Current Ratio 1.54
PB Ratio 0.69
Current Dividend $0.20
Dividend Yield 1.53%
Number of Consecutive Years of Dividend Growth 2

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $3,591,000,000
Total Current Liabilities $2,325,000,000
Long-Term Debt $268,000,000
Total Assets $14,527,000,000
Intangible Assets $6,089,000,000
Total Liabilities $3,572,000,000
Shares Outstanding (Diluted Average) 581,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.40
Jun2016 $0.30
Jun2015 -$0.26
Jun2014 $0.41
Jun2013 $0.87
Jun2012 -$3.58
Jun2011 $1.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.01
Jun2016 -$0.01
Jun2015 -$0.20
Jun2014 -$0.19
Jun2013 -$0.43
Jun2012 -$0.88
Jun2011 $0.39

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – November 2015
News Corporation Valuation – November 2015 Update $NWSA
27 Companies in the Spotlight This Week – 11/8/14
News Corp Annual Valuation – 2014 $NWSA

Other ModernGraham posts about related companies

Cinemark Holdings Inc Valuation – Initial Coverage $CNK
International Speedway Corp Valuation – Initial Coverage $ISCA
Corus Entertainment Inc Valuation – Initial Coverage $TSE:CJR.B
AMC Networks Inc Valuation – December 2016 $AMCX
Charter Communications Inc Valuation – Initial Coverage $CHTR
Cineplex Inc Valuation – Initial Coverage $TSE:CGX
Twenty-First Century Fox Inc Valuation – November 2016 $FOXA
Graham Holdings Co Valuation – August 2016 $GHC
CBS Corporation Valuation – August 2016 $CBS
Twenty-First Century Fox Inc Valuation – August 2016 $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.

News Corporation Valuation – November 2015 Update $NWSA

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 Most Undervalued Companies for the Defensive Investor – October 2015.  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 News Corporation (NWSA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): News Corporation is a diversified media and information services company. The Company is focused on creating and distributing content to consumers and businesses throughout the world. The Company operates through six segments: News and Information Services; Book Publishing; Digital Real Estate Services; Cable Network Programming; Digital Education, and Other. The Company comprises businesses across a range of media, including news and information services, book publishing, digital real estate services, cable network programming in Australia, digital education and pay-television distribution in Australia, that are distributed under brands, including the Wall Street Journal, Dow Jones, the Australian, Herald Sun, the Sun, the Times, HarperCollins Publishers, FOX SPORTS Australia, realestate.com.au, realtor.com and Foxtel. The Company also owns around 50% stake in Foxtel, the pay-television provider in Australia, which is accounted for as an equity investment.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NWSA – November 2015

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 $8,959,421,107 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.84 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1933.33% Pass
6. Moderate PEmg Ratio PEmg < 20 354.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.75 Pass
Score
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 1.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

NWSA value Chart November 2015

EPSmg $0.04
MG Growth Estimate 15.00%
MG Value $1.67
Opinion Overvalued
MG Value based on 3% Growth $0.63
MG Value based on 0% Growth $0.37
Market Implied Growth Rate 172.98%
Current Price $15.36
% of Intrinsic Value 920.68%

News Corporation does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the short history in its most recent business structure, and the high PEmg ratio.  The Enterprising Investor is concerned by the insufficient earnings stability over the last five years and the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from a loss of $1.19 in 2012 to an estimated gain of $0.04 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 173% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on News Corporation (NWSA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

NWSA Charts November 2015

Net Current Asset Value (NCAV) $1.42
Graham Number $14.58
PEmg 354.46
Current Ratio 1.84
PB Ratio 0.75
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $3,975,000,000
Total Current Liabilities $2,155,000,000
Long-Term Debt $0
Total Assets $15,093,000,000
Intangible Assets $5,305,000,000
Total Liabilities $3,148,000,000
Shares Outstanding (Diluted Average) 582,500,000

Earnings Per Share History

Next Fiscal Year Estimate $0.46
Jun15 -$0.26
Jun14 $0.41
Jun13 $0.87
Jun12 -$3.58

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.04
Jun15 -$0.28
Jun14 -$0.35
Jun13 -$0.66
Jun12 -$1.19

Recommended Reading:

Other ModernGraham posts about the company

27 Companies in the Spotlight This Week – 11/8/14
News Corp Annual Valuation – 2014 $NWSA

Other ModernGraham posts about related companies

The Best Companies of the Media Entertainment Industry – October 2015
Twenty-First Century Fox Inc. Valuation – October 2015 Update $FOXA
Graham Holdings Company Analysis – September 2015 Update $GHC
Scripps Networks Interactive Inc. Analysis – September 2015 Update $SNI
AMC Networks Inc. Analysis – Initial Coverage $AMCX
CBS Corporation Analysis – August 2015 Update $CBS
Twenty-First Century Fox Analysis – July 2015 Update $FOXA
Discovery Communications Analysis – 2015 Annual Update $DISCA
CBS Corporation Quarterly Valuation – May 2015 $CBS
Twenty-First Century Fox Inc. Quarterly Valuation – April 2015 $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.

News Corp Annual Valuation – 2014 $NWSA

220px-News_Corporation.svgBenjamin 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 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – October 2014.  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 specific look at how News Corp (NWSA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): News Corporation is a diversified media and information services company. The Company operates in five segments: News and Information Services, Cable Network Programming, Digital Real Estate Services, Book Publishing, and Other. The Company’s business consists of range of media, including news and information services, sports programming in Australia, digital real estate services, book publishing, and pay-television (TV) distribution in Australia, that are distributed under the brands, including The Wall Street Journal, Dow Jones, Herald Sun, The Sun, The Times, HarperCollins Publishers, FOX SPORTS Australia and realestate.com.au. The Company is a developing provider of digital education content, assessment and delivery services. The Company’s business component includes News and Information Services, Cable Network Programming, Digital Real Estate Services, Book Publishing, Amplify and Foxtel. In July 2014, it completed the acquisition of Harlequin Enterprises from Torstar Corp.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Balance Sheet – June 2014

Current Assets $5,270,000,000
Current Liabilities $2,264,000,000
Total Debt $0
Total Assets $16,489,000,000
Intangible Assets $4,919,000,000
Total Liabilities $3,246,000,000
Outstanding Shares 580,000,000

Earnings Per Share

2014 $0.41
2013 $0.87
2012 -$3.58
2011 $1.17

Earnings Per Share – ModernGraham

2014 -$0.19
2013 -$0.43
2012 -$0.88
2011 $0.39

Dividend History
News Corp does not pay a dividend.

Conclusion:

News Corp is not suitable for either the Defensive Investor or the Enterprising Investor.  Quite simply, the company does not have a long enough stand alone history in order to satisfy either investor type’s requirements.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  As for a valuation, it is difficult for the ModernGraham valuation model to estimate an intrinsic value based on such a short earnings history.  In addition, the company has not yet achieved a positive EPSmg (normalized earnings), which does not help its cause.  The intrinsic value therefore cannot be found via the earnings, but may be found in the balance sheet.  It should be noted that the Net Current Asset Value of the company is $3.49, so that gives a lower limit to the intrinsic value.  Speculators should be very cautious when valuing this company.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on News Corp (NWSA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in News Corp (NWSA) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

CBS Corporation Valuation – April 2018 $CBS

Company Profile (excerpt from Reuters): CBS Corporation, incorporated on November 10, 1986, is a mass media company. The Company operates through four segment: Entertainment, Cable Networks, Publishing and Local Media. The Entertainment segment comprises the CBS Television Network; CBS Television Studios; CBS Studios International and CBS Television Distribution; CBS Interactive; CBS Films; and the Company’s digital streaming services, CBS All Access and CBSN. The Cable Networks segment comprises Showtime Networks, which operates its subscription program services, Showtime, The Movie Channel, and Flix. The Publishing segment comprises Simon & Schuster, which publishes and distributes consumer books under imprints, such as Simon & Schuster, Pocket Books, Scribner and Gallery Books. The Local Media segment comprises CBS TV Stations, and CBS Local Digital Media. Its businesses span the media and entertainment industries, including the CBS TV Network, cable networks, content production and distribution, television stations, Internet-based businesses, and consumer publishing. It focuses on exhibiting its content on multiple digital platforms, including digital streaming services, as well as third-party live television streaming offerings.

CBS Chart

CBS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CBS – April 2018

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 $19,385,377,917 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 167.17% Pass
6. Moderate PEmg Ratio PEmg < 20 15.74 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.24 Fail
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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.11 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.23
MG Growth Estimate -0.58%
MG Value $23.75
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $46.88
MG Value based on 0% Growth $27.48
Market Implied Growth Rate 3.62%
Current Price $50.90
% of Intrinsic Value 214.29%

CBS Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.36 in 2014 to an estimated $3.23 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.62% 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 below the price.

At the time of valuation, further research into CBS Corporation revealed the company was trading above its Graham Number of $24.34. The company pays a dividend of $0.72 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 15.74, which was below the industry average of 32.74, 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 $-31.64.

CBS Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$31.64
Graham Number $24.34
PEmg 15.74
Current Ratio 1.58
PB Ratio 10.24
Current Dividend $0.72
Dividend Yield 1.41%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $6,273,000,000
Total Current Liabilities $3,972,000,000
Long-Term Debt $9,464,000,000
Total Assets $20,843,000,000
Intangible Assets $7,557,000,000
Total Liabilities $18,865,000,000
Shares Outstanding (Diluted Average) 398,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.10
Dec2017 $0.88
Dec2016 $2.81
Dec2015 $2.89
Dec2014 $5.27
Dec2013 $3.01
Dec2012 $2.39
Dec2011 $1.92
Dec2010 $1.04
Dec2009 $0.33
Dec2008 -$17.43
Dec2007 $1.73
Dec2006 $2.15
Dec2005 -$8.98
Dec2004 -$20.37
Dec2003 $1.61
Dec2002 $0.82
Dec2001 -$0.26
Dec2000 -$1.34
Dec1999 $0.90
Dec1998 -$0.42

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.23
Dec2017 $2.52
Dec2016 $3.32
Dec2015 $3.42
Dec2014 $3.36
Dec2013 $2.19
Dec2012 $0.40
Dec2011 -$1.23
Dec2010 -$2.68
Dec2009 -$4.50
Dec2008 -$7.47
Dec2007 -$3.25
Dec2006 -$5.48
Dec2005 -$8.01
Dec2004 -$6.32
Dec2003 $0.58
Dec2002 $0.03

Recommended Reading:

Other ModernGraham posts about the company

7 Best Undervalued Stocks of the Week – 9/3/16
CBS Corporation Valuation – August 2016 $CBS
6 Best Stocks For Value Investors This Week – 5/14/16
CBS Corporation Valuation – May 2016 $CBS
5 Undervalued Companies for Value Investors with a High Beta – January 2016

Other ModernGraham posts about related companies

Discovery Inc Valuation – April 2018 $DISCA
Time Warner Inc Valuation – March 2018 $TWX
Viacom Inc Valuation – March 2018 $VIAB
Twenty-First Century Fox Inc Valuation – March 2018 $FOXA
Walt Disney Co Valuation – February 2018 $DIS
Live Nation Entertainment Inc Valuation – Initial Coverage $LYV
Walt Disney Co Valuation – March 2017 $DIS
Tegna Inc Valuation – February 2017 $TGNA
E.W. Scripps Co Valuation – Initial Coverage $SSP
News Corp Valuation – February 2017 $NWSA

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.

Discovery Inc Valuation – April 2018 $DISCA

Company Profile (excerpt from Reuters): Discovery, Inc., formerly Discovery Communications, Inc., incorporated on April 28, 2008, is a global media company. The Company provides content across multiple distribution platforms, including pay-television (pay-TV), free-to-air (FTA) and broadcast television, Websites, digital distribution arrangements and content licensing agreements. The Company’s segments include U.S. Networks, which consists principally of domestic television networks and digital content services; International Networks, consisting primarily of international television networks and digital content services, and Education and Other, which consists principally of curriculum-based product and service offerings, and production studios.

DISCA Chart

DISCA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DISCA – April 2018

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 $11,170,821,952 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.34 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 6.81% Fail
6. Moderate PEmg Ratio PEmg < 20 20.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.75 Fail
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 5.34 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.82 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.09
MG Growth Estimate -2.51%
MG Value $3.80
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $15.84
MG Value based on 0% Growth $9.29
Market Implied Growth Rate 6.10%
Current Price $22.62
% of Intrinsic Value 595.15%

Discovery Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.31 in 2014 to an estimated $1.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.1% 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 below the price.

At the time of valuation, further research into Discovery Inc revealed the company was trading above its Graham Number of $20.96. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 20.7, which was below the industry average of 32.74, 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 $-14.18.

Discovery Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.18
Graham Number $20.96
PEmg 20.70
Current Ratio 5.34
PB Ratio 2.75
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $9,991,000,000
Total Current Liabilities $1,871,000,000
Long-Term Debt $14,755,000,000
Total Assets $22,555,000,000
Intangible Assets $11,056,000,000
Total Liabilities $17,945,000,000
Shares Outstanding (Diluted Average) 561,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.61
Dec2017 -$0.59
Dec2016 $1.96
Dec2015 $1.58
Dec2014 $1.66
Dec2013 $1.49
Dec2012 $0.63
Dec2011 $1.40
Dec2010 $0.76
Dec2009 $0.64
Dec2008 $0.49
Dec2007 -$0.12
Dec2006 -$0.08
Dec2005 $0.06
Dec2004 $0.12
Dec2003 -$0.10
Dec2002 -$0.23
Dec2001 -$1.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.09
Dec2017 $0.96
Dec2016 $1.65
Dec2015 $1.44
Dec2014 $1.31
Dec2013 $1.09
Dec2012 $0.85
Dec2011 $0.85
Dec2010 $0.50
Dec2009 $0.31
Dec2008 $0.13
Dec2007 -$0.04
Dec2006 -$0.01
Dec2005 -$0.07
Dec2004 -$0.18
Dec2003 -$0.31
Dec2002 -$0.37

Recommended Reading:

Other ModernGraham posts about the company

Discovery Communications Inc Valuation – August 2016 $DISCA
Discovery Communications Analysis – 2015 Annual Update $DISCA
15 Companies in the Spotlight This Week – 5/31/14
Discovery Communications 2014 Annual Valuation $DISCA

Other ModernGraham posts about related companies

Time Warner Inc Valuation – March 2018 $TWX
Comcast Corporation Valuation – March 2018 $CMCSA
Viacom Inc Valuation – March 2018 $VIAB
Twenty-First Century Fox Inc Valuation – March 2018 $FOXA
Walt Disney Co Valuation – February 2018 $DIS
Live Nation Entertainment Inc Valuation – Initial Coverage $LYV
Walt Disney Co Valuation – March 2017 $DIS
Tegna Inc Valuation – February 2017 $TGNA
E.W. Scripps Co Valuation – Initial Coverage $SSP
News Corp Valuation – February 2017 $NWSA

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.

Time Warner Inc Valuation – March 2018 $TWX

Company Profile (excerpt from Reuters): Time Warner Inc., incorporated on February 4, 2000, is a media and entertainment company. The Company operates through three segments: Turner, which consists of cable networks and digital media properties; Home Box Office, which consists of premium pay television and over the top (OTT) services and premium pay, basic tier television and OTT services internationally, and Warner Bros., which consists of television, feature film, home video, and videogame production and distribution. The Company also holds interests in companies that operate broadcast networks.

TWX Chart

TWX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TWX – March 2018

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 $73,508,814,519 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.08 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 165.72% Pass
6. Moderate PEmg Ratio PEmg < 20 15.64 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.63 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 1.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 16.02 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

EPSmg $6.03
MG Growth Estimate 10.09%
MG Value $172.92
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $87.41
MG Value based on 0% Growth $51.24
Market Implied Growth Rate 3.57%
Current Price $94.26
% of Intrinsic Value 54.51%

Time Warner Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $3.6 in 2014 to an estimated $6.03 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.57% 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 Time Warner Inc revealed the company was trading above its Graham Number of $76.12. The company pays a dividend of $1.61 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 15.64, which was below the industry average of 35.9, 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 $-32.35.

Time Warner Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$32.35
Graham Number $76.12
PEmg 15.64
Current Ratio 1.08
PB Ratio 2.63
Current Dividend $1.61
Dividend Yield 1.71%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $15,219,000,000
Total Current Liabilities $14,077,000,000
Long-Term Debt $18,294,000,000
Total Assets $69,209,000,000
Intangible Assets $35,367,000,000
Total Liabilities $40,834,000,000
Shares Outstanding (Diluted Average) 791,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.08
Dec2017 $6.64
Dec2016 $4.96
Dec2015 $4.62
Dec2014 $4.34
Dec2013 $3.92
Dec2012 $3.00
Dec2011 $2.71
Dec2010 $2.25
Dec2009 $2.07
Dec2008 -$11.23
Dec2007 $3.51
Dec2006 $4.65
Dec2005 $1.71
Dec2004 $1.98
Dec2003 $1.41
Dec2002 -$66.15
Dec2001 -$3.96
Jun2000 $1.44
Jun1999 $0.90
Jun1998 -$0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.03
Dec2017 $5.30
Dec2016 $4.48
Dec2015 $4.06
Dec2014 $3.60
Dec2013 $3.09
Dec2012 $1.70
Dec2011 $0.65
Dec2010 -$0.17
Dec2009 -$0.87
Dec2008 -$1.52
Dec2007 $3.11
Dec2006 -$1.82
Dec2005 -$7.70
Dec2004 -$12.63
Dec2003 -$17.71
Dec2002 -$22.71

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Time Warner Inc. Annual Valuation – 2015 $TWX
28 Companies in the Spotlight This Week – 11/1/14
Time Warner Inc. Quarterly Valuation – October 2014 $TWX
19 Companies in the Spotlight This Week – 7/26/14

Other ModernGraham posts about related companies

Comcast Corporation Valuation – March 2018 $CMCSA
Viacom Inc Valuation – March 2018 $VIAB
Twenty-First Century Fox Inc Valuation – March 2018 $FOXA
Walt Disney Co Valuation – February 2018 $DIS
Live Nation Entertainment Inc Valuation – Initial Coverage $LYV
Walt Disney Co Valuation – March 2017 $DIS
Tegna Inc Valuation – February 2017 $TGNA
E.W. Scripps Co Valuation – Initial Coverage $SSP
News Corp Valuation – February 2017 $NWSA
Cinemark Holdings Inc Valuation – Initial Coverage $CNK

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.

Comcast Corporation Valuation – March 2018 $CMCSA

Company Profile (obtained from Marketwatch): Comcast Corp. is a media, entertainment, and communications company, which engages in the provision of video, Internet, and phone services. It operates through the following segments: Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks. The Cable Communications segment provides services to business customers and sell advertising. The Cable Networks segment consists of national cable networks, regional sports, news networks, international cable networks, and cable television studio production operations. The Broadcast Television segment includes NBC and Telemundo broadcast networks. The Filmed Entertainment segment involves in the management of Universal Pictures and DreamWorks Animation. The Theme Parks segment comprises of Universal theme parks in Orlando, Florida, and Hollywood, California and Universal Studios theme park in Osaka, Japan. The company was founded by Ralph J. Roberts in 1963 and is headquartered in Philadelphia, PA.

CMCSA Chart

CMCSA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMCSA – March 2018

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 $169,199,412,411 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.74 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 329.14% Pass
6. Moderate PEmg Ratio PEmg < 20 13.67 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.51 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 0.74 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.80 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

EPSmg $2.67
MG Growth Estimate 15.00%
MG Value $102.62
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $38.65
MG Value based on 0% Growth $22.66
Market Implied Growth Rate 2.58%
Current Price $36.43
% of Intrinsic Value 35.50%

Comcast Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the 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 $1.25 in 2014 to an estimated $2.67 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.58% 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 Comcast Corporation revealed the company was trading above its Graham Number of $26.79. The company pays a dividend of $0.63 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 13.67, which was below the industry average of 35.9, 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 $-21.64.

Comcast Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$21.64
Graham Number $26.79
PEmg 13.67
Current Ratio 0.74
PB Ratio 2.51
Current Dividend $0.63
Dividend Yield 1.73%
Number of Consecutive Years of Dividend Growth 10

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $16,060,000,000
Total Current Liabilities $21,561,000,000
Long-Term Debt $59,422,000,000
Total Assets $186,949,000,000
Intangible Assets $114,923,000,000
Total Liabilities $118,343,000,000
Shares Outstanding (Diluted Average) 4,726,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.16
Dec2017 $4.75
Dec2016 $1.78
Dec2015 $1.62
Dec2014 $1.60
Dec2013 $1.28
Dec2012 $1.14
Dec2011 $0.75
Dec2010 $0.65
Dec2009 $0.63
Dec2008 $0.43
Dec2007 $0.42
Dec2006 $0.40
Dec2005 $0.09
Dec2004 $0.15
Dec2003 $0.48
Dec2002 -$0.06
Dec2001 $0.21
Dec2000 $0.71
Dec1999 $0.44
Dec1998 $0.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.67
Dec2017 $2.68
Dec2016 $1.59
Dec2015 $1.42
Dec2014 $1.25
Dec2013 $1.01
Dec2012 $0.82
Dec2011 $0.63
Dec2010 $0.55
Dec2009 $0.47
Dec2008 $0.36
Dec2007 $0.31
Dec2006 $0.25
Dec2005 $0.17
Dec2004 $0.24
Dec2003 $0.31
Dec2002 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Comcast Corporation Valuation – June 2016 $CMCSA
58 Companies in the Spotlight This Week – 1/31/15
Comcast Corporation Annual Valuation – 2015 $CMCSA
14 Companies in the Spotlight This Week – 1/18/14
ModernGraham Valuation: Comcast Corporation (CMCSA)

Other ModernGraham posts about related companies

Twenty-First Century Fox Inc Valuation – March 2018 $FOXA
Walt Disney Co Valuation – February 2018 $DIS
Live Nation Entertainment Inc Valuation – Initial Coverage $LYV
Walt Disney Co Valuation – March 2017 $DIS
Tegna Inc Valuation – February 2017 $TGNA
E.W. Scripps Co Valuation – Initial Coverage $SSP
News Corp Valuation – February 2017 $NWSA
Cinemark Holdings Inc Valuation – Initial Coverage $CNK
International Speedway Corp Valuation – Initial Coverage $ISCA
Corus Entertainment Inc Valuation – Initial Coverage $TSE:CJR.B

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.

Viacom Inc Valuation – March 2018 $VIAB

Company Profile (obtained from Marketwatch): Viacom, Inc. is a global entertainment content company, which connects with audiences through compelling television programs, motion pictures, short-form video, applications, games, brands for consumer products, social media and other entertainment content. The company operates business through the following business segments: Media Networks and Filmed Entertainment. The Media Networks segment provides entertainment content and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers. It creates, acquires and distributes programming and other content to its audiences across multiple platforms. The Media Networks segment produces, finances, acquires and distributes motion pictures, television programming and other entertainment content under the Paramount Pictures, Paramount Vantage, Paramount Classics, Insurge Pictures, MTV Films, Nickelodeon Movies and Paramount Television brands. Viacom was founded by Sumner M. Redstone on December 31, 2005 and is headquartered in New York, NY.

VIAB Chart

VIAB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VIAB – March 2018

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 $13,447,741,229 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.41 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 41.50% Pass
6. Moderate PEmg Ratio PEmg < 20 8.01 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.01 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 1.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.86 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.09
MG Growth Estimate -1.36%
MG Value $23.60
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $59.25
MG Value based on 0% Growth $34.73
Market Implied Growth Rate -0.25%
Current Price $32.72
% of Intrinsic Value 138.63%

Viacom, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.49 in 2014 to an estimated $4.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.25% annual earnings loss 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 below the price.

At the time of valuation, further research into Viacom, Inc. revealed the company was trading below its Graham Number of $33.72. The company pays a dividend of $0.8 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.01, which was below the industry average of 35.9, 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 $-28.01.

Viacom, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.01
Graham Number $33.72
PEmg 8.01
Current Ratio 1.41
PB Ratio 2.01
Current Dividend $0.80
Dividend Yield 2.44%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $5,005,000,000
Total Current Liabilities $3,538,000,000
Long-Term Debt $10,069,000,000
Total Assets $22,831,000,000
Intangible Assets $11,965,000,000
Total Liabilities $16,281,000,000
Shares Outstanding (Diluted Average) 402,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.37
Sep2017 $4.68
Sep2016 $3.61
Sep2015 $4.73
Sep2014 $5.43
Sep2013 $4.84
Sep2012 $3.69
Sep2011 $3.59
Dec2009 $2.65
Dec2008 $2.00
Dec2007 $2.72
Dec2006 $2.22
Dec2005 $1.73
Dec2004 $1.84
Dec2003 $1.52
Dec2002 $1.19
Dec2001 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.09
Sep2017 $4.52
Sep2016 $4.44
Sep2015 $4.72
Sep2014 $4.49
Sep2013 $3.80
Sep2012 $3.17
Sep2011 $2.81
Dec2009 $2.37
Dec2008 $2.19
Dec2007 $2.19
Dec2006 $1.85
Dec2005 $1.57
Dec2004 $1.33
Dec2003 $0.94
Dec2002 $0.55
Dec2001 $0.19

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Viacom Inc. Quarterly Stock Valuation – September 2014 $VIAB

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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.

Twenty-First Century Fox Inc Valuation – March 2018 $FOXA

Company Profile (obtained from Marketwatch): Twenty-First Century Fox, Inc. is a media company, which engages in television broadcasting and film production. It operates through the following segments: Cable Network Programming; Television; Filmed Entertainment; Direct Broadcast Satellite Television, and Other Corporate and Eliminations. The Cable Network Programming segment consists of the production and licensing of programming distributed through cable television systems and direct broadcast satellite operators. The Television segment offers broadcasting of network programming. The Filmed Entertainment offers production and acquisition of live-action and animated motion pictures for distribution and licensing in entertainment media. The Direct Broadcast Satellite Television segment involves in the distribution of basic and premium programming services via satellite and broadband directly to subscribers. The Other, Corporate and Eliminations segment comprises of corporate overhead and eliminations. The company was founded in 1979 and is headquartered in New York, NY.

FOXA Chart

FOXA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FOXA – March 2018

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 $67,541,166,249 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.16 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 651.39% Pass
6. Moderate PEmg Ratio PEmg < 20 16.96 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.70 Fail
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 2.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.05 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

 

EPSmg $2.16
MG Growth Estimate 3.32%
MG Value $32.73
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $31.33
MG Value based on 0% Growth $18.37
Market Implied Growth Rate 4.23%
Current Price $36.65
% of Intrinsic Value 111.97%

Twenty-First Century Fox Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.77 in 2014 to an estimated $2.16 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.23% 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 below 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 $21.42. The company pays a dividend of $0.36 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 16.96, which was below the industry average of 35.9, 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 $-9.2.

Twenty-First Century Fox Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.20
Graham Number $21.42
PEmg 16.96
Current Ratio 2.16
PB Ratio 3.70
Current Dividend $0.36
Dividend Yield 0.98%
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $17,402,000,000
Total Current Liabilities $8,055,000,000
Long-Term Debt $19,163,000,000
Total Assets $52,858,000,000
Intangible Assets $19,017,000,000
Total Liabilities $34,469,000,000
Shares Outstanding (Diluted Average) 1,855,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.40
Jun2017 $1.59
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

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.16
Jun2017 $2.16
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

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10 Low PE Stock Picks for the Enterprising Investor – Dec 2016
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News Corp Valuation – February 2017 $NWSA
Cinemark Holdings Inc Valuation – Initial Coverage $CNK
International Speedway Corp Valuation – Initial Coverage $ISCA
Corus Entertainment Inc Valuation – Initial Coverage $TSE:CJR.B
AMC Networks Inc Valuation – December 2016 $AMCX

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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