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 the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Twenty-First Century Fox Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 13.40%
01 FCFF0 4,546
1 FCFF1 5,070 = 4,546 × (1 + 11.51%) 4,471
2 FCFF2 5,623 = 5,070 × (1 + 10.90%) 4,373
3 FCFF3 6,201 = 5,623 × (1 + 10.29%) 4,253
4 FCFF4 6,801 = 6,201 × (1 + 9.67%) 4,113
5 FCFF5 7,417 = 6,801 × (1 + 9.06%) 3,956
5 Terminal value (TV5) 186,598 = 7,417 × (1 + 9.06%) ÷ (13.40% – 9.06%) 99,524
Intrinsic value of Twenty-First Century Fox Inc. capital 120,690
Less: Borrowings (fair value) 22,591
Intrinsic value of Twenty-First Century Fox Inc. common stock 98,099
 
Intrinsic value of Twenty-First Century Fox Inc. common stock (per share) $52.83
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.

Weighted Average Cost of Capital (WACC)

Twenty-First Century Fox Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 91,788 0.80 15.56%
Borrowings (fair value) 22,591 0.20 4.59% = 6.01% × (1 – 23.67%)

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

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,856,929,453 × $49.43
= $91,788,022,861.79

   Borrowings (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (28.00% + 30.00% + 27.00% + 13.00% + 25.00% + 19.00%) ÷ 6
= 23.67%

WACC = 13.40%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Twenty-First Century Fox Inc., PRAT model

Microsoft Excel
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)
Interest expense, net 1,248 1,219 1,184 1,198 1,121 1,063
Income (loss) from discontinued operations, net of tax (12) (44) (8) (67) 729 277
Net income attributable to Twenty-First Century Fox, Inc. stockholders 4,464 2,952 2,755 8,306 4,514 7,097
 
Effective income tax rate (EITR)1 28.00% 30.00% 27.00% 13.00% 25.00% 19.00%
 
Interest expense, net, after tax2 899 853 864 1,042 841 861
Add: Dividends declared 667 668 586 586 568 398
Interest expense (after tax) and dividends 1,566 1,521 1,450 1,628 1,409 1,259
 
EBIT(1 – EITR)3 5,375 3,849 3,627 9,415 4,626 7,681
 
Current borrowings 1,054 457 427 244 799 137
Non-current borrowings 18,469 19,456 19,298 18,795 18,259 16,321
Total Twenty-First Century Fox, Inc. stockholders’ equity 19,564 15,722 13,661 17,220 17,418 16,998
Total capital 39,087 35,635 33,386 36,259 36,476 33,456
Financial Ratios
Retention rate (RR)4 0.71 0.60 0.60 0.83 0.70 0.84
Return on invested capital (ROIC)5 13.75% 10.80% 10.86% 25.97% 12.68% 22.96%
Averages
RR 0.71
ROIC 16.17%
 
FCFF growth rate (g)6 11.51%

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).

1 See details »

2018 Calculations

2 Interest expense, net, after tax = Interest expense, net × (1 – EITR)
= 1,248 × (1 – 28.00%)
= 899

3 EBIT(1 – EITR) = Net income attributable to Twenty-First Century Fox, Inc. stockholders – Income (loss) from discontinued operations, net of tax + Interest expense, net, after tax
= 4,464 – -12 + 899
= 5,375

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [5,375 – 1,566] ÷ 5,375
= 0.71

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 5,375 ÷ 39,087
= 13.75%

6 g = RR × ROIC
= 0.71 × 16.17%
= 11.51%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (114,379 × 13.40% – 4,546) ÷ (114,379 + 4,546)
= 9.06%

where:

Total capital, fair value0 = current fair value of Twenty-First Century Fox Inc. debt and equity (US$ in millions)
FCFF0 = the last year Twenty-First Century Fox Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Twenty-First Century Fox Inc. capital

FCFF growth rate (g) forecast

Twenty-First Century Fox Inc., H-model

Microsoft Excel
Year Value gt
1 g1 11.51%
2 g2 10.90%
3 g3 10.29%
4 g4 9.67%
5 and thereafter g5 9.06%

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)
= 11.51% + (9.06% – 11.51%) × (2 – 1) ÷ (5 – 1)
= 10.90%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 11.51% + (9.06% – 11.51%) × (3 – 1) ÷ (5 – 1)
= 10.29%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 11.51% + (9.06% – 11.51%) × (4 – 1) ÷ (5 – 1)
= 9.67%