Stock Analysis on Net
Stock Analysis on Net

Twenty-First Century Fox Inc. (NASDAQ:FOX)

This company has been moved to the archive! The financial data has not been updated since February 6, 2019.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Twenty-First Century Fox Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 15.90%
01 FCFE0 3,273
1 FCFE1 4,124 = 3,273 × (1 + 26.00%) 3,558
2 FCFE2 5,051 = 4,124 × (1 + 22.48%) 3,760
3 FCFE3 6,008 = 5,051 × (1 + 18.95%) 3,859
4 FCFE4 6,935 = 6,008 × (1 + 15.43%) 3,844
5 FCFE5 7,761 = 6,935 × (1 + 11.91%) 3,711
5 Terminal value (TV5) 217,654 = 7,761 × (1 + 11.91%) ÷ (15.90% – 11.91%) 104,079
Intrinsic value of Twenty-First Century Fox Inc. common stock 122,812
 
Intrinsic value of Twenty-First Century Fox Inc. common stock (per share) $66.14
Current share price $49.43

Based on: 10-K (reporting date: 2018-06-30).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.68%
Expected rate of return on market portfolio2 E(RM) 13.78%
Systematic risk of Twenty-First Century Fox Inc. common stock βFOX 1.23
 
Required rate of return on Twenty-First Century Fox Inc. common stock3 rFOX 15.90%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rFOX = RF + βFOX [E(RM) – RF]
= 4.68% + 1.23 [13.78% – 4.68%]
= 15.90%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Twenty-First Century Fox Inc., PRAT model

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Average Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
Selected Financial Data (US$ in millions)
Dividends declared 667 668 586 586 568 398
Net income attributable to Twenty-First Century Fox, Inc. stockholders 4,464 2,952 2,755 8,306 4,514 7,097
Revenues 30,400 28,500 27,326 28,987 31,867 27,675
Total assets 53,831 50,724 48,365 50,051 54,793 50,944
Total Twenty-First Century Fox, Inc. stockholders’ equity 19,564 15,722 13,661 17,220 17,418 16,998
Financial Ratios
Retention rate1 0.85 0.77 0.79 0.93 0.87 0.94
Profit margin2 14.68% 10.36% 10.08% 28.65% 14.17% 25.64%
Asset turnover3 0.56 0.56 0.56 0.58 0.58 0.54
Financial leverage4 2.75 3.23 3.54 2.91 3.15 3.00
Averages
Retention rate 0.86
Profit margin 17.26%
Asset turnover 0.57
Financial leverage 3.09
 
FCFE growth rate (g)5 26.00%

Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

2018 Calculations

1 Retention rate = (Net income attributable to Twenty-First Century Fox, Inc. stockholders – Dividends declared) ÷ Net income attributable to Twenty-First Century Fox, Inc. stockholders
= (4,464 – 667) ÷ 4,464
= 0.85

2 Profit margin = 100 × Net income attributable to Twenty-First Century Fox, Inc. stockholders ÷ Revenues
= 100 × 4,464 ÷ 30,400
= 14.68%

3 Asset turnover = Revenues ÷ Total assets
= 30,400 ÷ 53,831
= 0.56

4 Financial leverage = Total assets ÷ Total Twenty-First Century Fox, Inc. stockholders’ equity
= 53,831 ÷ 19,564
= 2.75

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.86 × 17.26% × 0.57 × 3.09
= 26.00%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (91,788 × 15.90% – 3,273) ÷ (91,788 + 3,273)
= 11.91%

where:
Equity market value0 = current market value of Twenty-First Century Fox Inc. common stock (US$ in millions)
FCFE0 = the last year Twenty-First Century Fox Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Twenty-First Century Fox Inc. common stock

FCFE growth rate (g) forecast

Twenty-First Century Fox Inc., H-model

Microsoft Excel
Year Value gt
1 g1 26.00%
2 g2 22.48%
3 g3 18.95%
4 g4 15.43%
5 and thereafter g5 11.91%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 26.00% + (11.91% – 26.00%) × (2 – 1) ÷ (5 – 1)
= 22.48%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 26.00% + (11.91% – 26.00%) × (3 – 1) ÷ (5 – 1)
= 18.95%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 26.00% + (11.91% – 26.00%) × (4 – 1) ÷ (5 – 1)
= 15.43%