Media Entertainment Stocks

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

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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

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Enterprising Investor – Dec 2016
5 Undervalued Stocks for Enterprising Value Investors Near Lows – September 2016
10 Undervalued Stocks for the Enterprising Investor – August 2016
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016
14 Best Undervalued Stocks of the Week – 8/6/16

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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.

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