3. Economy
With a beta of 1.049, FOXA
is very well correlated with
market performance
With a positive economic
outlook, It is necessary to
assume that FOXA will
generate future value
4. Industry
With the rise in production
budgets and television
advertisements, the industry
performance is expected to
grow
Cumulative ROE sits at 24%.
Highly Attractive
8. FOX's ROIC
Overall EOY ROIC increased 27.8% from 2012 to 15.3% in 2016
Decreased by 4.3% in past year
Main driver is EOY pretax ROIC
Increased from 15.9% in 2012 to 21% in 2016
Increased 32.5% from 2012 to 2011
All three efficiency drivers decreased
Positive effect on ROIC because FOX has been more efficient with money generated from sales to pay
SGA and depreciation costs
Gross Margin decreased from 1.032 to 1.022 between 2012 and 2016
Operating margin positively increased from .188 in 2012 to .219 in 2016
Cash rate increased from 24.5% to 27.2% between 2012 and 2016
Tax rate increased by 115%, drastically lowering ROIC in past year
9. CFI
FCF decreased between 2012
to 2016
Increasing working capital
from 2012 to 2016
FOX investing significant
money into working capital
FCF spiked in 2015
(142) investment in working
capital
Increase FCF for that year
(anomaly)
Excess cash increased 2015 to
2016
FOX must have invested
large amount of excess cash
into new projects
(decreasing their CFI)
12. CFI
Debt increased from 19
in 2015 to (-686) in 2016
FOX investing capital
into new projects
FOX buying back
millions of shares
Negative # shares
issued in past 5 years
# shares repurchased
increased from 4,589 in
2012 to 4,904 in 2016
Reduced CFI from
6,587
14. As-is Valuation
• Current Share Price: $26.66
• Model Share Price: $26.40
• Predict that revenue growth will
decline, based on historical figures
and current events
• EBITDA and depreciation increase
to fit 23.3% margin
15. Bull,Bear and Target Valuations
Bull Valuation –Model Share Price is$ 45.51
Growth will decrease less drastically
Depreciation and EBITDA will remain the same
Bear Valuation – Model Share Price is $16.55
Large growth will decline quickly
EBITDA will decrease significantly
Depreciation will increase
Target Valuation – Model Share price is$31.50
Slow growth decline
EBITDA will decrease
Depreciation will increase
19. Multiples Table
• Estimated g = 11.96%
• Spread = 5.35%
• Margin = 23.13%
Fox multiples consistently below industry averages
Still indicative of a positive spread in the future
Weighted average industry EV/EBIT 10.6 vs Fox 9.47
Indicates that there is most likely positive spread– yet smaller than industry average
Industry PEG 1.37 vs Fox 1.06
Suggests that fox still efficiently investing funds and will be profitable in future
Both Fox’s P/B and long term growth EPS greater than industry average
Stock selling at premium and forecasted to be profitable in long term
20. Multiples Table
FOX vs CBS vs Time Warner
Growth: CBS>FOX>Time Warner
EV/EBIT: Time Warner>CBS>FOX
PEG: Time Warner>FOX>CBS
Margin: Time Warner>FOX>CBS
• Implied multiples
below range of
Bloomberg multiples
Notes de l'éditeur
For this section you are trying to explain whether the industry is attractive and how that might evolve over time. You are also explaining the impact of the economy and industry on the company as well as the impact of competitive advantage (if any) of the company on returns.
Economy - a list of peer betas from the RV screen with an industry beta and an assessment of economic sensitivity of the company and the industry.
Industry - a five forces table of the current and future industry along with a writeup of each of the forces and why you believe they are changing. Include a screenshot of the RV screen with the weighted industry operating ROIC and WACC
New Entrants: Netflix, online video business...
Suppliers: actors,show content,
Buyer: advertisement,consumers
Substitutions:other networks,other platforms
Company - discuss the competitive advantage for now and in 5 yrs. Refer to the RV screen of the industry ROIC.
ROIC Tree - Include an industry ROIC tree and discuss the key drivers of the changes in ROIC over the last 5 years for the industry and any key company / competitor insights.
CFI - Include a copy of the 5 Year CFI table with totals. Discuss the major items that explain the CFI and the corresponding financing flows over the 5 years for the company. Focus on Gross Cash Flow, Free Cash Flow, Reinvestment Rate and the financing flows of debt and equity.
ROIC Tree - Include an industry ROIC tree and discuss the key drivers of the changes in ROIC over the last 5 years for the industry and any key company / competitor insights.
ROIC Tree - Include an industry ROIC tree and discuss the key drivers of the changes in ROIC over the last 5 years for the industry and any key company / competitor insights.
CFI - Include a copy of the 5 Year CFI table with totals. Discuss the major items that explain the CFI and the corresponding financing flows over the 5 years for the company. Focus on Gross Cash Flow, Free Cash Flow, Reinvestment Rate and the financing flows of debt and equity.
ROIC chart - include a screenshot of the roic chart and defend your final valuation using the chart
Include a table of the multiples for a minimum of 6 companies (your company and at least 5 peers) as well as the industry weighted average. Include the estimated g, spread and margin based on the current multiples. Discuss how this data explains the relative differences in the multiples and why companies are trading at premiums or discounts for your company and the peer average. You must do this analysis on at least 2 additional companies in addition to your peers.
Fox's multiples are consistently below the industry averages. The weighted average EV/EBIT ratio is 10.6 while Fox's is 9.47. The multiple is sufficiently high to indicate that there is most likely a positive spread, but the spread is probably smaller than the industry average. The same can be said for both EV/EBITDA and EV/Sales. The industry averages were 9.42 and 2.73 respectively, while Fox's values were 8.69 and 2.19 respectively. While Fox's multiples are below the weighted average of its comps, they are still indicative of a positive spread in the future. Fox's P/E ratio is 12.68 compared to the industry average of 14.17. The PEG ratio is 1.06 compared to the industry average of 1.37. While it is under the average, a value greater than one suggests that Fox is efficiently investing its funds and will be profitable in the future. Fox's P/B ratio of 3.61 is greater than the industry average of 3.42. This suggests that the market values Fox at a higher value than its book value and that its stock is selling at a premium. Fox's long term growth EPS of 11.96 is also greater than the industry average of 11.04, indicating that the stock is forecasted to be profitable in the long term. Fox's estimated margin of 23.13% is less than the industry average of 25.75%, but is still greater than CBS' margin. Therefore, the multiples analysis supports holding FOXA because while it is not an industry leader, its multiples suggests that Fox is still profitable and will yield positive returns.
Include a table of the multiples for a minimum of 6 companies (your company and at least 5 peers) as well as the industry weighted average. Include the estimated g, spread and margin based on the current multiples. Discuss how this data explains the relative differences in the multiples and why companies are trading at premiums or discounts for your company and the peer average. You must do this analysis on at least 2 additional companies in addition to your peers.
Fox's multiples are consistently below the industry averages. The weighted average EV/EBIT ratio is 10.6 while Fox's is 9.47. The multiple is sufficiently high to indicate that there is most likely a positive spread, but the spread is probably smaller than the industry average. The same can be said for both EV/EBITDA and EV/Sales. The industry averages were 9.42 and 2.73 respectively, while Fox's values were 8.69 and 2.19 respectively. While Fox's multiples are below the weighted average of its comps, they are still indicative of a positive spread in the future. Fox's P/E ratio is 12.68 compared to the industry average of 14.17. The PEG ratio is 1.06 compared to the industry average of 1.37. While it is under the average, a value greater than one suggests that Fox is efficiently investing its funds and will be profitable in the future. Fox's P/B ratio of 3.61 is greater than the industry average of 3.42. This suggests that the market values Fox at a higher value than its book value and that its stock is selling at a premium. Fox's long term growth EPS of 11.96 is also greater than the industry average of 11.04, indicating that the stock is forecasted to be profitable in the long term. Fox's estimated margin of 23.13% is less than the industry average of 25.75%, but is still greater than CBS' margin. Therefore, the multiples analysis supports holding FOXA because while it is not an industry leader, its multiples suggests that Fox is still profitable and will yield positive returns.
