Twenty-First Century Fox Inc. Valuation – October 2015 Update $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 Most Undervalued Companies for the Defensive Investor – September 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 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.


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Downloadable PDF version of this valuation:

ModernGraham Valuation of FOXA – October 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 $57,353,392,684 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.39 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 356.63% Pass
6. Moderate PEmg Ratio PEmg < 20 11.85 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.46 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 2.39 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 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 Pass

Stage 2: Determination of Intrinsic Value

FOXA value Chart October 2015

EPSmg $2.44
MG Growth Estimate 15.00%
MG Value $93.81
Opinion Undervalued
MG Value based on 3% Growth $35.33
MG Value based on 0% Growth $20.71
Market Implied Growth Rate 1.68%
Current Price $28.88
% of Intrinsic Value 30.79%

Twenty-First Century Fox Inc. qualifies for the both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned with the insufficient earnings stability over the last ten years.  The Enterprising Investor is only concerned by 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 comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.58 in 2012 to an estimated $2.44 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.68% 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 above 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 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.

Stage 3: Information for Further Research

FOXA Charts October 2015

Net Current Asset Value (NCAV) -$7.50
Graham Number $17.93
PEmg 11.85
Current Ratio 2.39
PB Ratio 3.46
Dividend Yield 0.95%
Number of Consecutive Years of Dividend Growth 3



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Most Recent Balance Sheet Figures

Total Current Assets $17,376,000,000
Total Current Liabilities $7,262,000,000
Long-Term Debt $18,795,000,000
Total Assets $50,051,000,000
Intangible Assets $18,833,000,000
Total Liabilities $32,831,000,000
Shares Outstanding (Diluted Average) 2,061,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.69
Jun15 $3.90
Jun14 $1.99
Jun13 $3.03
Jun12 $0.47
Jun11 $1.04
Jun10 $0.97
Jun09 -$1.29
Jun08 $1.81
Jun07 $1.14
Jun06 $0.76
Jun05 $0.73
Jun04 $0.58
Jun03 $0.31
Jun02 -$2.74
Jun01 -$0.56
Jun00 $0.76
Jun99 $0.48
Jun98 $0.57
Jun97 $0.31
Jun96 $0.25

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.44
Jun15 $2.57
Jun14 $1.77
Jun13 $1.39
Jun12 $0.58
Jun11 $0.66
Jun10 $0.54
Jun09 $0.43
Jun08 $1.20
Jun07 $0.83
Jun06 $0.42
Jun05 $0.06
Jun04 -$0.30
Jun03 -$0.61
Jun02 -$0.81
Jun01 $0.21
Jun00 $0.55

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Enterprising Investor – August 2015
10 Most Undervalued Companies for the Enterprising Investor – August 2015
10 Companies Benjamin Graham Would Invest In Today – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
Twenty-First Century Fox Analysis – July 2015 Update $FOXA

Other ModernGraham posts about related companies

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
Time Warner Inc. Annual Valuation – 2015 $TWX
Comcast Corporation Annual Valuation – 2015 $CMCSA


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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