Twenty-First Century Fox Inc. Quarterly Valuation – April 2015 $FOXA

220px-21st_Century_Fox_logo.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 Most Undervalued Companies for the Defensive Investor – March 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 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 global media and entertainment company. The Company’s Cable Network Programming segment consists of the production and licensing of programming distributed primarily through cable television systems, direct broadcast satellite operators, telecommunication companies and online video distributors. The Television segment consists of the broadcasting of network programming in the United States and the operation of 28 full power broadcast television stations, including 10 duopolies, in the United States. The Filmed Entertainment segment consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide. The Direct Broadcast Satellite Television consists of the distribution of programming services via satellite, cable, and broadband directly to subscribers in Italy, Germany and Austria.

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

  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 - PASS
  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 - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

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

  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 - FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $34.44
MG Value $100.69
MG Opinion Undervalued
Value Based on 3% Growth $37.92
Value Based on 0% Growth $22.23
Market Implied Growth Rate 2.33%
Net Current Asset Value (NCAV) -$5.84
PEmg 13.17
Current Ratio 2.80
PB Ratio 3.74

Balance Sheet - December 2014

Current Assets $20,264,000,000
Current Liabilities $7,239,000,000
Total Debt $18,901,000,000
Total Assets $52,652,000,000
Intangible Assets $18,875,000,000
Total Liabilities $32,839,000,000
Outstanding Shares 2,152,000,000

Earnings Per Share

2015 (estimate) $4.04
2014 $1.99
2013 $3.03
2012 $0.47
2011 $1.04
2010 $0.97
2009 -$1.29
2008 $1.81
2007 $1.14
2006 $0.76
2005 $0.73

Earnings Per Share – ModernGraham

2015 (estimate) $2.62
2014 $1.77
2013 $1.39
2012 $0.58
2011 $0.66
2010 $0.54

Dividend History


Twenty-First Century Fox Inc. is suitable for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned by the lack of earnings stability over the last ten years, while the Enterprising Investor’s only concern is the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.66 in 2011 to an estimated $2.62 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 2.33% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Twenty-First Century Fox Inc. (FOXA) for greater perspective!

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 Twenty-First Century Fox Inc. (FOXA)?  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 Twenty-First Century Fox Inc. (FOXA) 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.

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