In this part of the series, we’ll look at some key metrics you can use to compare media companies’ valuation. We’ll specifically look at media valuation multiples, which can be used to value conglomerates. To measure valuation, 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) multiples are often used.
Price-based multiples take into account value from a shareholder’s perspective. EV-based multiples help investors understand a company’s value through its sources of capital from a shareholder’s point of view. These are forward multiples based on expected value after a year.
Is 21st Century Fox undervalued?
On a forward PE basis, 21st Century Fox (FOXA) appears undervalued compared with peers. As the graph above indicates, 21st Century Fox has a forward PE multiple of 14.9x and a forward EV-to-EBITDA multiple of 9.7x. In contrast, Walt Disney (DIS) has a forward EV-to-EBITDA multiple of 10.6x and a PE multiple of 17.0x. Peers Comcast (CMCSA) and Time Warner (TWX) have forward EV-to-EBITDA multiples of 8.2x and 10.6x, respectively.
21st Century Fox’s value proposition
21st Century Fox’s strategic initiatives to boost its brand, including its entry in the online television service space with Hulu’s online television service and its high program ratings for its Cable Networks segment, should enable it to handle the increasing competition in the media industry. The company’s Star entertainment network in India (EPI) is also paying off.