News Corp. Is Rich With Cash and Trades at a Bargain Price

Could News Corp.’s financial position make it attractive to a potential investor?

Jul 2, 2014 at 3:24PM

News Corp. (NASDAQ:NWS) (NASDAQ:NWSA) split from Twenty-First Century Fox in 2013 and left all the debt with the latter, giving the "old media" company financial stability and the opportunity to compete in the changing media landscape. As a result, News Corp. carries no long-term debt on its balance sheet, has a cash hoard of over $3 billion, and is extremely liquid.

Although the company's revenue and earnings are naturally declining as advertising dollars turn more to digital media, it is not in a death spiral by any means and still maintains a slew of well-recognized brands. Moreover, News Corp. generates a lot of cash from its operations even in the face of declining revenue and earnings.

No debt and flush with cash
Compared to its competitors Pearson (NYSE:PSO) and Thomson Reuters (NYSE:TRI), News Corp. maintains an envious financial position, as outlined in the following table.


Current Ratio

Quick Ratio


FCF positive?

News Corp.










Thomson Reuters





Data Source: Morningstar

Many companies would love to be as liquid as News Corp. Its current and quick ratios of 2.15 and 1.88, respectively, display how flush with cash and liquid assets the company currently is. Having a current ratio above one is well-advised, while having a quick ratio above one exhibits strong liquidity and flexibility -- News Corp. certainly fits that billing. Pearson's current ratio is solid at 1.36, but both Pearson and Thomson Reuters deviate from News Corp. considering their respective quick ratios.

News Corp. also shines due to its lack of long-term debt, leading to its debt-to-equity ratio of zero. Both Pearson and Thomson Reuters carry debt, however, and do not have as much flexibility as News Corp. on a liquidity or capitalization basis. In Pearson's and Thomson's favor, however, the companies are free cash flow positive in the last three years, just like News Corp.

If you can't beat 'em, buy 'em
News Corp.'s extreme liquidity and zero debt could actually make it attractive to Pearson or Thomson Reuters as an acquisition. Pearson or Thomson could eliminate a competitor, while also adding a company with strong cash flow, no debt, and above average liquidity. Even by employing debt in a buyout, they could possibly improve their own financial conditions with the purchase of News Corp.

Adding to the likelihood and attractiveness of an acquisition, News Corp. trades at low valuations. Astonishingly, News Corp.'s P/B ratio is currently less than one at 0.8, so an investor could pick up the company for less than it is worth on an accounting basis; any earnings the company generated would be a plus. Moreover, News Corp.'s P/B value is a significant discount to its industry's average and to the S&P 500's, which are 1.9 and 2.6 respectively. Furthermore, News Corp. trades at a significant discount to its industry and to the S&P 500 on a sales basis. Its P/S multiple is 1.2, while the industry's is 2.6 and the S&P 500's is 1.7.

News Corp. could also prove attractive to a company with an affinity for old media such as Berkshire Hathaway. Berkshire has recently purchased newspapers throughout the country, and News Corp. still holds some newspaper assets in addition to The Wall Street Journal and Dow Jones.

Foolish takeaway
It is as if News Corp. was intentionally structured after its split from 21st Century Fox to be an attractive acquisition target. Regardless, the company is in a position to not only be acquired but also prosper on its own. It will be hard, however, for potential suitors to ignore a company with such strong financials and a multitude of recognized brands and assets. I believe the future is bright for News Corp. going forward as its valuation makes it attractive to investors and its financial position gives it the flexibility to take on the changing media landscape.

Warren Buffett could like News Corp. but he definitely doesn't like this
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Andrew Sebastian has the following options: long January 2015 $18 calls on News Corporation. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers