News Corporation (NWS) — Reasonably Priced With Poor Growth Indicators
News returned losses of -18.8% last year, with its stock price reaching a high of $22.46 and a low of $15.15. Over the same period, the stock underperformed the S&P 500 index by -12.0%. As of April 2023, the company's 50-day average price was $18.05. News Corporation, a media and information services company, creates and distributes authoritative and engaging content, and other products and services for consumers and businesses worldwide. Based in New York, NY, the large-cap Consumer Discretionary company has 25,500 full time employees. News has offered a 1.1% dividend yield over the last 12 months.
The Business Runs With Low Leverage Levels:
| 2019-06-30 | 2020-06-30 | 2021-06-30 | 2022-06-30 | |
|---|---|---|---|---|
| Revenue | $10,074,000 | $9,008,000 | $9,358,000 | $10,385,000 |
| Operating Margins | 5.8% | 4.1% | 6.3% | 9.4% |
| Net Income | $155,000 | -$1,269,000 | $330,000 | $623,000 |
| Net Margins | 1.54% | -14.09% | 3.53% | 6.0% |
| Earnings Per Share | $0.26 | -$2.16 | $0.56 | $0.51 |
| Diluted Shares | 588,000 | 588,000 | 593,000 | 494,998 |
| Free Cash Flow | $356,000 | $342,000 | $847,000 | $855,000 |
| Capital Expenditures | -$572,000 | -$438,000 | -$390,000 | -$499,000 |
| Net Current Assets | -$1,350,000 | -$2,411,000 | -$3,169,000 | -$3,985,000 |
| Current Ratio | 1.21 | 1.29 | 1.38 | 1.16 |
| Long Term Debt | $1,004,000 | $1,093,000 | $2,213,000 | $2,736,000 |
| Net Debt / EBITDA | n/a | n/a | 0.06 | 0.72 |
News Has an Attractive P/B Ratio but a Worrisome P/E Ratio:
News has a trailing twelve month P/E ratio of 35.4 compared to the Consumer Discretionary sector's average of 22.33. News's PEG ratio is 2.46 on the basis of the 14.4% weighted average of the company and the broader market's EPS compound average growth rates. This suggests that the company's shares are overvalued. In contrast, the market is likely undervaluing News in terms of its equity because its P/B ratio is 1.2. In comparison, the sector average is 3.12. The company's shares are currently trading 37.1% above their Graham number. In conclusion, News's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.
Overview of News's Market Factors:
News has an average amount of shares sold short because 2.3% of the company's shares are sold short. Institutions own 39.8% of the company's shares, and the insider ownership rate stands at 40.2%, suggesting a large amount of insider shareholders. The largest shareholder is Independent Franchise Partners, LLP, whose 6% stake in the company is worth $218,023,166.
