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Is News Corporation (NASDAQ:NWSA) As Strong As Its Balance Sheet Indicates?

Simply Wall St

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Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as News Corporation (NASDAQ:NWSA), with a market capitalization of US$7.8b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Let’s take a look at NWSA’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of News's financial health, so you should conduct further analysis into NWSA here.

See our latest analysis for News

Does NWSA Produce Much Cash Relative To Its Debt?

NWSA has built up its total debt levels in the last twelve months, from US$276m to US$1.6b , which accounts for long term debt. With this growth in debt, the current cash and short-term investment levels stands at US$1.7b , ready to be used for running the business. Additionally, NWSA has generated cash from operations of US$953m during the same period of time, leading to an operating cash to total debt ratio of 60%, indicating that NWSA’s current level of operating cash is high enough to cover debt.

Can NWSA meet its short-term obligations with the cash in hand?

At the current liabilities level of US$3.7b, the company has been able to meet these commitments with a current assets level of US$4.2b, leading to a 1.15x current account ratio. The current ratio is calculated by dividing current assets by current liabilities. Generally, for Media companies, this is a reasonable ratio as there's enough of a cash buffer without holding too much capital in low return investments.

NasdaqGS:NWSA Historical Debt, July 18th 2019

Is NWSA’s debt level acceptable?

NWSA’s level of debt is appropriate relative to its total equity, at 15%. NWSA is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for NWSA, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

NWSA has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for NWSA's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research News to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for NWSA’s future growth? Take a look at our free research report of analyst consensus for NWSA’s outlook.
  2. Valuation: What is NWSA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether NWSA is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.