News CorporationNWSNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $58.34 per share(market-calibrated)

+122.5%

Upside to Fair Value

Current

$26.22

Pure Model

$61.19

Fair Value

$58.34

Bull Case

$73.59

Bear Case

$50.08

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $61.19.

What's Driving This Ratingfor NWS

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.09% of revenue (heavy investment phase). Model fades this to 4.50% by Year 10, freeing up ~$66M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 15.86% — below the sector mature average of 22.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.2B (19.99% margin).

→

Moderate revenue growth

Analyst consensus projects 4.28% revenue growth, fading to 3.00% by Year 10. Revenue reaches $11.1B (vs $8.5B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $50.23/share (22.2x terminal FCF) while exit multiple gives $72.15/share (36.3x terminal FCF). The 22x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 60.63% indicates efficient cash generation. FCF reaches $1.8B by Year 10 (16.55% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.97

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.86%

Cost of Debt

Pre-tax Cost of Debt2.18%

Tax Rate29.79%

After-tax Cost of Debt1.53%

Equity Weight (E/V)83.51%

Debt Weight (D/V)16.49%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (83.51% × 8.86%) + (16.49% × 1.53%)

= 7.65%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$8.8B	$9.5B	$9.9B	$10.3B	$11.1B
EBIT	$1.4B	$1.5B	$1.6B	$1.9B	$2.2B
Tax	$416M	$450M	$468M	$553M	$662M
NOPAT	$981M	$1.1B	$1.1B	$1.3B	$1.6B
+ Depreciation	$644M	$696M	$724M	$751M	$813M
- Capex	$449M	$472M	$478M	$483M	$500M
- Δ NWC	$36M	$37M	$13M	$20M	$32M
Free Cash Flow	$1.1B	$1.2B	$1.3B	$1.6B	$1.8B
Discount Factor	0.929	0.802	0.692	0.597	0.479
Present Value	$1.1B	$999M	$923M	$926M	$881M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.8B

Terminal Growth Rate3.00%

WACC7.65%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$40.8B

PV of Terminal Value$19.5B

Exit Multiple Method

Year 10 EBITDA$3.0B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$66.8B

PV of Terminal Value$32.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$9.5B

PV of Terminal Value$19.5B

Enterprise Value$29.1B

(-) Net Debt$537M

Equity Value$28.5B

Shares Outstanding568M

Price per Share$50.23

Exit Multiple Method

PV of Projected FCFs$9.5B

PV of Terminal Value$32.0B

Enterprise Value$41.5B

(-) Net Debt$537M

Equity Value$41.0B

Shares Outstanding568M

Price per Share$72.15

Pure Model Fair Value

$61.19

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
5.65%	$77.77	$82.07	$88.00	$96.70	$97.23
6.65%	$66.31	$68.66	$71.66	$75.62	$81.07
7.65%	$58.01	$59.44	$61.19	$63.36	$66.12
8.65%	$51.56	$52.50	$53.61	$54.93	$56.53
9.65%	$46.32	$46.97	$47.71	$48.58	$49.60

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$50.08

91.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.21

Base Case

$61.19

133.4% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.97

Bull Case

$73.59

180.7% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.82

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Communication Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.28%

Year 3 Revenue Growth4.09%

Year 5 Revenue Growth1.38%

Year 7 Revenue Growth2.03%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin15.86%

Terminal EBIT Margin22.00%

Tax Rate29.79%

Historical Capex / Rev5.09%

Terminal Capex / Rev4.50%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 22x EV/EBITDA (Communication Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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