DCF Studio

    NWS · NMS · Communication Services

    News Corporation

    Also onConsensus Drift

    Implied value per share

    USD 15.18

    Market price

    USD 32.68

    Implied upside

    -53.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 15.18-53.6%
    Exit multiple
    USD 26.88-17.7%
    Market price
    USD 32.68

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m376m753mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 9.4bnUSD 9.8bnUSD 10.2bnUSD 10.6bnUSD 11.0bn+4.1%
    EBITUSD 988.3mUSD 1.0bnUSD 1.1bnUSD 1.1bnUSD 1.2bn+4.1%
    NOPATUSD 780.8mUSD 812.5mUSD 845.4mUSD 879.8mUSD 915.5m+4.1%
    Add depreciation & amortisationUSD 500.6mUSD 520.9mUSD 542.1mUSD 564.1mUSD 587.0m+4.1%
    Less capital expenditureUSD -427.2mUSD -444.6mUSD -462.6mUSD -481.4mUSD -501.0m+4.1%
    Less increase in working capitalUSD -212.3mUSD -220.9mUSD -229.9mUSD -239.2mUSD -248.9m+4.1%
    Free cashflow to firmUSD 641.8mUSD 667.9mUSD 695.0mUSD 723.2mUSD 752.6m+4.1%
    Discount factor0.95540.87220.79620.72680.6635-
    Present valueUSD 613.2mUSD 582.5mUSD 553.3mUSD 525.6mUSD 499.3m-5.0%
    Present Value Of The ForecastUSD 2.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.948Reported 0.923, pulled toward 1.0 (Blume)
    Cost of equity10.21%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 17.5bn85.7% of capital
    Total debtUSD 2.9bn14.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.55%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 15.18

    70% of EV

    Forecast FCFF, final year
    USD 752.6m
    Capex at depreciation, working capital in reinvestment
    USD 915.5m
    Less reinvestment at g/ROIC (26.2% of NOPAT)
    USD -239.8m
    Capitalised
    USD 675.7m
    ROIC (WACC floor)
    9.5%
    Terminal value, undiscounted
    USD 9.8bn
    Terminal value, discounted
    USD 6.5bn
    Enterprise value
    USD 9.3bn
    Less net debt
    USD 820.0m
    Equity value
    USD 8.5bn

    Exit at 11.3x EBITDA

    Value per shareUSD 26.88

    82% of EV

    Terminal value, undiscounted
    USD 19.7bn
    Terminal value, discounted
    USD 13.1bn
    Enterprise value
    USD 15.8bn
    Less net debt
    USD 820.0m
    Equity value
    USD 15.0bn

    Spread between methods: 56%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.55%19.6219.7019.7819.8619.93
    8.55%17.0717.1417.2117.2717.34
    9.55%15.0615.1215.1815.2415.29
    10.55%13.4413.4913.5413.5913.64
    11.55%12.1012.1512.1912.2312.28

    Outlined: this model. Green text: above today's price of 32.68. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year4.1%36.2%+32.2pp
    EBIT margin10.5%20.9%+10.4pp
    Discount rate9.5%5.4%-4.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.