Yahoo Finance All You Need To Know About News Corporation’s (NASDAQ:NWSA) Financial Health
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as News Corporation (NASDAQ:NWSA), with a market cap of US$7.34b, often get neglected by retail investors. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine NWSA’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. 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.
Check out our latest analysis for News
Does NWSA produce enough cash relative to debt?
Over the past year, NWSA has ramped up its debt from US$379.0m to US$1.95b – this includes both the current and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$2.03b for investing into the business. Moreover, NWSA has generated US$757.0m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 38.8%, meaning that NWSA’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for loss making businesses since metrics such as return on asset (ROA) requires positive earnings. In NWSA’s case, it is able to generate 0.39x cash from its debt capital.
Can NWSA meet its short-term obligations with the cash in hand?
With current liabilities at US$3.30b, it appears that the company has been able to meet these obligations given the level of current assets of US$4.39b, with a current ratio of 1.33x. For Media companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can NWSA service its debt comfortably?
NWSA’s level of debt is appropriate relative to its total equity, at 18.6%. 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’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure NWSA has company-specific issues impacting its capital structure decisions. I suggest you continue to research News to get a more holistic view of the stock by looking at:
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.
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.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
