Standing out among the Street's worst performers today is Liberty Media, a film and entertainment company whose shares slumped -3.9% to a price of $38.06, 20.15% below its average analyst target price of $47.67.
The average analyst rating for the stock is buy. BATRK underperformed the S&P 500 index by -4.0% during today's afternoon session.
Atlanta Braves Holdings, Inc. owns and operates league baseball club. The company is a consumer cyclical company, whose sales and revenues correlate with periods of economic expansion and contraction. The reason behind this is that when the economy is growing, the average consumer has more money to spend on the discretionary (non necessary) products that cyclical consumer companies tend to offer. Consumer cyclical stocks may offer more growth potential than non-cyclical or defensive stocks, but at the expense of higher volatility.
Liberty Media does not publish either its forward or trailing P/E ratios because their values are negative -- meaning that each share of stock represents a net earnings loss. But we can calculate these P/E ratios anyways using the stocks forward and trailing (EPS) values of $-0.2 and $-1.54. We can see that BATRK has a forward P/E ratio of -190.3 and a trailing P/E ratio of -24.7. As of the first quarter of 2023, the average Price to Earnings (P/E) ratio for US consumer discretionary companies is 22.33, and the S&P 500 has an average of 15.97. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for Liberty Media was $35.0 Million as of its last annual report. Free cash flow represents the amount of money available for reinvestment in the business or for payments to equity investors in the form of a dividend. In BATRK's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-25500000.0 and they've been growing at an average rate of 22.5%.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (its share price divided by its book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method. Liberty media's P/B ratio is 12.96 -- in other words, the market value of the company exceeds its book value by a factor of more than 12, so the company's assets may be overvalued compared to the average P/B ratio of the Consumer Discretionary sector, which stands at 3.12 as of the first quarter of 2023.
Since it has a negative P/E ratio, an elevated P/B ratio, and an unconvincing cash flow history with an upwards trend, Liberty Media is likely overvalued at today's prices. The company has poor growth indicators because of a negative PEG ratio and consistently negative margins with a positive growth rate. We hope you enjoyed this overview of BATRK's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
