World Wrestling Entertainment, Inc (NYSE: WWE) investors have enjoyed seeing the stock price increase by 47.1% over the last month. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.
What’s The Opportunity In World Wrestling?
World Wrestling appears to be overvalued by -57.6% at the moment, based on 11 separate valuation models. The stock is currently trading at $57.86 on the market compared to our average intrinsic value of $24.52. This means that the buying opportunity has probably disappeared for now.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$29.34||-49.3%|
|5-yr DCF Revenue Exit||$32.92||-43.1%|
|Peer Revenue Multiples||$35.01||-39.5%|
|10-yr DCF EBITDA Exit||$26.92||-53.5%|
|5-yr DCF EBITDA Exit||$31.05||-46.3%|
|Peer EBITDA Multiples||$31.99||-44.7%|
|10-yr DCF Growth Exit||$18.59||-67.9%|
|5-yr DCF Growth Exit||$17.93||-69.0%|
|Peer P/E Multiples||$17.48||-69.8%|
|Dividend Discount Model (multi-stage)||$17.20||-70.3%|
|Earnings Power Value||$11.29||-80.5%|
Click on any of the analyses above to view the latest model with real-time data.
Furthermore, World Wrestling’s share price also seems relatively stable compared to the rest of the market as indicated by its low beta of 0.95. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon. And once it’s there, it may be hard to fall back down into an attractive buying range.
Can We Expect Growth From World Wrestling?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.
source: finbox.io data explorer
With World Wrestling’s relatively muted EBITDA growth of 4.0% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.
What This Means For Investors
Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.
But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about World Wrestling?
Unfortunately for shareholders, World Wrestling’s future growth is relatively low and it appears the stock is now trading above its intrinsic value. Therefore, it may be a good time to begin reducing your position in the company. However, there are also other factors to consider that could explain the current overvaluation.
It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on World Wrestling by taking a look at the following:
Valuation Metrics: what is World Wrestling’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.
Risk Metrics: how much interest coverage does World Wrestling have? This is a ratio used to assess a firm’s ability to pay interest expenses based on operating profits (EBIT). View the company’s interest coverage here.
Efficiency Metrics: fixed asset turnover is calculated by dividing revenue by average fixed assets. View World Wrestling’s fixed asset turnover here.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.