Company ProfileÂ (obtained fromÂ 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.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|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
|MG Growth Estimate||3.32%|
|MG Value based on 3% Growth||$31.33|
|MG Value based on 0% Growth||$18.37|
|Market Implied Growth Rate||4.23%|
|% 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|
|Number of Consecutive Years of Dividend Growth||4|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
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|
|Shares Outstanding (Diluted Average)||1,855,000,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$2.40|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$2.16|
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The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.