DCF Studio

    NWS.AX · ASX · Communication Services

    News Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 16.68

    Market price

    AUD 46.56

    Implied upside

    -64.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.4042

    AdjustedReports in USD, trades in AUD. Modelled in USD, converted at the end.

    Value Per Share

    Perpetuity growth
    AUD 16.68-64.2%
    Exit multiple
    AUD 48.37+3.9%
    Market price
    AUD 46.56

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m324m648mFY27FY28FY29FY30FY31
    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 691.8mUSD 719.9mUSD 749.1mUSD 779.5mUSD 811.2m+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 552.9mUSD 575.3mUSD 598.7mUSD 623.0mUSD 648.3m+4.1%
    Discount factor0.95160.86180.78050.70680.6401-
    Present valueUSD 526.1mUSD 495.8mUSD 467.3mUSD 440.3mUSD 415.0m-5.8%
    Present Value Of The ForecastUSD 2.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.948Reported 0.923, pulled toward 1.0 (Blume)
    Cost of equity11.04%Risk-free + beta x equity risk premium
    Cost of debt7.35%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 25.0bn89.5% of capital
    Total debtUSD 2.9bn10.5% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC10.42%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 11.88

    69% of EV

    Forecast FCFF, final year
    USD 648.3m
    Capex at depreciation, working capital in reinvestment
    USD 811.2m
    Less reinvestment at g/ROIC (24.0% of NOPAT)
    USD -194.6m
    Capitalised
    USD 616.6m
    ROIC (WACC floor)
    10.4%
    Terminal value, undiscounted
    USD 8.0bn
    Terminal value, discounted
    USD 5.1bn
    Enterprise value
    USD 7.5bn
    Less net debt
    USD 820.0m
    Equity value
    USD 6.6bn

    Exit at 15.8x EBITDA

    Value per shareUSD 34.44

    88% of EV

    Terminal value, undiscounted
    USD 27.7bn
    Terminal value, discounted
    USD 17.7bn
    Enterprise value
    USD 20.1bn
    Less net debt
    USD 820.0m
    Equity value
    USD 19.2bn

    Spread between methods: 97%.

    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%
    8.42%15.0915.1515.2115.2715.33
    9.42%13.2613.3113.3613.4113.46
    10.42%11.7911.8311.8811.9211.96
    11.42%10.5810.6110.6510.6910.73
    12.42%9.569.609.639.679.70

    Outlined: this model. Green text: above today's price of 33.16. 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%55.2%+51.2pp
    EBIT margin10.5%26.1%+15.5pp
    Discount rate10.4%4.8%-5.6pp
    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.