Liberty Media's (LSXMK) Price Dips Amidst Concerns of Highly Leveraged Balance Sheet

Now trading at a price of $34.34, Liberty Media has moved -0.5% so far today.

As of July 2023, the company's 50-day average price was $30.34. The Liberty SiriusXM Group, through its subsidiaries, engages in the entertainment business in the United States and Canada. The large-cap Industrials company is based in Englewood, CO. Liberty Media has not offered a dividend during the last year.

Exceptional Profitability Overshadowed by Excessive Leverage:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $7,794 $8,040 $8,696 $9,003
Gross Margins 50.6% 51.0% 50.6% 50.2%
Operating Margins 20.9% 21.8% 22.3% 22.1%
Net Margins 6.34% -9.29% 6.89% 14.35%
Net Income (MM) $494 -$747 $599 $1,292
Net Interest Expense (MM) -$435 -$469 -$495 -$511
Depreciation & Amort. (MM) -$537 -$573 -$603 -$611
Earnings Per Share $1.48 -$2.33 $1.78 $3.33
EPS Growth n/a -257.43% 176.39% 87.08%
Diluted Shares (MM) 333 336 337 268
Free Cash Flow (MM) $1,581 $1,574 $1,506 $1,533
Capital Expenditures (MM) -$363 -$350 -$388 -$426
Net Current Assets (MM) -$13,725 -$17,433 -$17,960 -$17,028
Current Ratio 0.42 0.47 0.41 0.36
Long Term Debt (MM) $9,244 $12,525 $12,078 $11,600
Net Debt / EBITDA 5.04 29.94 7.72 4.44

Liberty Media benefits from growing revenues and increasing reinvestment in the business, strong margins with a stable trend, and exceptional EPS growth. The company's financial statements show a steady stream of strong cash flows and wider gross margins than its peer group. However, the firm has a highly leveraged balance sheet.

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

Liberty Media has a trailing twelve month P/E ratio of 9.1, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of $3.21, the company has a forward P/E ratio of 9.5. According to the 16.7% compound average growth rate of Liberty Media's historical and projected earnings per share, the company's PEG ratio is 0.54. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 9.9%. On this basis, the company's PEG ratio is 0.92. This suggests that its shares are undervalued. Additionally, the market is possibly undervaluing Liberty Media in terms of its equity because its P/B ratio is 1.26 whereas the sector average is 3.78. The company's shares are currently trading 34.5% above their Graham number.

Liberty Media Has an Analyst Consensus of Some Upside Potential:

The 3 analysts following Liberty Media have set target prices ranging from $36.0 to $53.0 per share, for an average of $42.33 with a buy rating. As of April 2023, the company is trading -28.3% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Liberty Media has an average amount of shares sold short because 2.8% of the company's shares are sold short. Institutions own 84.9% of the company's shares, and the insider ownership rate stands at 10.66%, suggesting a large amount of insider shareholders. The largest shareholder is Berkshire Hathaway, Inc, whose 20% stake in the company is worth $1,483,772,719.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.