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Today we're going to take a look at the well-established Fox Corporation (NASDAQ:FOXA). The company's stock saw its share price hover around a small range of US$29.10 to US$31.91 over the last few weeks. But is this actually reflective of the share value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fox’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Fox
What Is Fox Worth?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.03x is currently trading slightly above its industry peers’ ratio of 13.48x, which means if you buy Fox today, you’d be paying a relatively sensible price for it. And if you believe that Fox should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Fox’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Fox?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Fox's earnings over the next few years are expected to increase by 54%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in FOXA’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at FOXA? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on FOXA, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for FOXA, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.