Time Warner’s Valuation: What the Metrics Say



Valuation metrics

In this part of our series, we’ll look at some key metrics that investors can use to compare the valuations of media companies. We’ll specifically look at media valuation multiples, which aid in the valuation of conglomerates.

The most common valuation multiples for companies are the PE (price-to-earnings), EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), PCF (price to cash flow), and PFCF (price-to-free-cash-flow) ratios.

Remember, price-based multiples take into account value from a shareholder’s perspective, while EV-based multiples help investors understand the value of a company from a capital holders’ point of view.

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Time Warner’s valuation

As the above graph shows, Time Warner (TWX) has a forward PE multiple of 16.3x, which is high among its peers. Of these peers, Twenty-First Century Fox (FOXA) and CBS (CBS) have forward PE ratios of 14.7x and 14.6x, respectively, while Walt Disney (DIS) has a higher PE multiple at 16.4x.

Time Warner has a forward EV-to-EBITDA multiple of 10.8x, while Twenty-First Century Fox has the lowest forward EV-to-EBITDA among its peers at 9.6x.

Time Warner’s value proposition

Time Warner is pursuing original programming for its Turner segment, which bodes well for the parent company in the long term. The company is also pursuing a content licensing strategy in international markets instead of owning a network, which could reap rich benefits in the long term.

Time Warner’s viewership for its digital platforms is rising. These platforms include HBO Now, HBO Go, and HBO On Demand. This trend indicates that the company is poised to corner a significant share of the online streaming market.


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