NEW YORK (TheStreet) -- Shares of Twenty-First Century Fox (FOXA) are advancing 1% to $33.74 today after analysts at Credit Suisse initiated coverage of the company with an "outperform" rating and a price target of $40.
The firm cited several reasons for its positive coverage initiation. Analysts see the current weak ratings performance at Fox to improve over the next 1-2 years, driving a recovery in ad revenue growth. Also, the company has one of the strongest film slates in the industry, including the Avatar sequel that is set to come out in 2017.
The stock is trading on modest multiples versus its recent history, the analyst note highlighted.
TheStreet Ratings team rates TWENTY-FIRST CENTURY FOX INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TWENTY-FIRST CENTURY FOX INC (FOXA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, TWENTY-FIRST CENTURY FOX INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 36.30% is the gross profit margin for TWENTY-FIRST CENTURY FOX INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.25% is above that of the industry average.
- Net operating cash flow has significantly increased by 53.66% to $1,761.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.23%.
- Even though the current debt-to-equity ratio is 1.06, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Despite the fact that FOXA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.09 is high and demonstrates strong liquidity.
- You can view the full analysis from the report here: FOXA Ratings Report