After News Corp Revenues Fall 11% – Is It A Buy?

With new cases of the coronavirus spiking in the US and worldwide.

With the already historic unemployment levels and job losses in recent months.

With massive uncertainty in hospitals, banks, and other industries.

And with many Blue-Chip stocks looking vulnerable when they’re supposed to be among the best areas to invest your capital.

There are few safe places to invest your today.  And this number grows smaller every day this crisis lasts.

The key to continue compounding your investments and build wealth is to keep investing well over time.

Most people think the number one way to do that is to invest in assets that will grow your capital.

And this is a huge part of things.

But another huge part of this is also losing as little capital as possible.

The fewer investment losses you have the more capital you keep.  And the more capital you keep the faster you can invest well to grow your wealth.

In recent articles I’ve shown you several stocks to avoid investing in…

Today, I want to answer… After News Corp Revenues Fall 11% – Is It A Buy?

News Corp (NWSA) is a worldwide media conglomerate that owns large brands in the United States, United Kingdom, and Australia.

Some of its most famous brands are…

  • The Wall Street Journal
  • Herald Sun
  • The Times
  • Fox Sports
  • Foxtel
  • HarperCollins

And more.

A few years ago, it sold its famous Fox News channel into another entity – Fox Corporation… But that was what the company’s most famous asset before that transaction.

It’s based in New York City New York.  It has a $11 billion market cap. And it pays a 1.1% dividend… Which is reason #1 to consider buying its stock.

News Corp’s 1.1% Dividend

Over the last decade News Corp’s paid out a total of $1 per share in dividends after beginning its dividend in 2016.

At today’s share count of 589 million shares that’s equal to $589 million paid out to shareholders in that time.

These dividend payments will help you in normal times earn cash if you take the money out.  Or allow you to buy more shares over time if you reinvest the dividends.

It can do this because it earns solid profits.  Which is reason #2 to buy News Corp to Depression Proof Your Portfolio.

News Corp Earns Decent Profits

Over the last decade it earned an average operating income margin of 3.7% per year.

I look for anything above 10%. 

Another way to show this is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 5% per year on average.

I call this the “Cash Machine” metric.

I look for anything above 5% on a consistent basis for the same reasons as I look for high operating profit margins above.  If a company surpasses both thresholds it makes it a great operating business that is safe and valuable.

And News Corp surpasses one while missing the mark on the other…

These decent profits also allow News Corp to have reasonable debt which is reason #3 to buy its stock.

News Corp Has Reasonable Debt

As of this writing News Corp has $1.54 billion in cash compared to $2.54 billion in debt.

As a percentage of its balance sheet, total liabilities make up 43.8%.

Its debt makes up only 23.1% of its current market cap.

And its debt-to-equity ratio is 0.31.

These are all well below what I look for when considering an investment… Which means its low levels of debt add a margin of safety to potentially investing in News Corp stock.

So far News Corp looks like a decent investment…  But what about its valuation?  Is it cheap? 

News Corp IS NOT Cheap

With the markets at or near all-time highs you’d expect a good stock like News Corp to be selling at an enormous valuation.

And unfortunately, it is.

As of this writing its P/E is 51.2.

Its P/CF is 12.1.

Its forward P/E is 80.7.

And its enterprise value to operating income – EV/EBIT is 29.1.

On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.

And on EV/EBIT I look to buy stocks below 8.

This means, News Corp is overvalued by a large amount now.

And this means owning its stock gives you no margin of safety in investing terminology.

When you invest in stocks that have a margin of safety it makes the investment safer.  And it also means you should expect to earn higher returns owning it in the coming years.

The inverse of this is also true…

When you invest in a stock without a margin of safety it makes the investment riskier.  And it also means you should expect to earn less owning its stock going forward.

With News Corp being overvalued it makes the investment riskier.  Even with the other things above.

Conclusion

If you’re looking for a solid, safe, stable, and enormously profitable investment to buy to Depression Proof Your Portfolio – consider investing in News Corp. But only when it’s cheaper.

And only after considering some of the other great looking stocks we’ve already found below… That frankly look like better investments right now than News Corp.

Click here to see some of the stocks we recommend to Depression Proof Your Portfolio.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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