News CorporationNWSANASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $62.27 per share(market-calibrated)

+161.5%

Upside to Fair Value

Current

$23.81

Pure Model

$65.45

Fair Value

$62.27

Bull Case

$78.93

Bear Case

$53.52

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: $65.45.

What's Driving This Ratingfor NWSA

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.42% of revenue (heavy investment phase). Model fades this to 4.50% by Year 10, freeing up ~$102M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 17.30% — below the sector mature average of 22.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.3B (20.46% margin).

→

Moderate revenue growth

Analyst consensus projects 4.21% 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 $54.76/share (22.8x terminal FCF) while exit multiple gives $76.15/share (35.8x 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 61.41% indicates efficient cash generation. FCF reaches $1.9B by Year 10 (17.32% 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 Debt1.91%

Tax Rate29.79%

After-tax Cost of Debt1.34%

Equity Weight (E/V)82.14%

Debt Weight (D/V)17.86%

WACC Calculation

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

WACC = (82.14% × 8.86%) + (17.86% × 1.34%)

= 7.51%

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	$1.5B	$1.6B	$1.7B	$2.0B	$2.3B
Tax	$454M	$491M	$510M	$581M	$678M
NOPAT	$1.1B	$1.2B	$1.2B	$1.4B	$1.6B
+ Depreciation	$683M	$738M	$767M	$796M	$862M
- Capex	$478M	$496M	$496M	$494M	$500M
- Δ NWC	$36M	$38M	$13M	$20M	$32M
Free Cash Flow	$1.2B	$1.4B	$1.5B	$1.7B	$1.9B
Discount Factor	0.930	0.805	0.696	0.602	0.485
Present Value	$1.2B	$1.1B	$1.0B	$995M	$934M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.9B

Terminal Growth Rate3.00%

WACC7.51%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$44.0B

PV of Terminal Value$21.3B

Exit Multiple Method

Year 10 EBITDA$3.1B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$69.0B

PV of Terminal Value$33.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$10.3B

PV of Terminal Value$21.3B

Enterprise Value$31.6B

(-) Net Debt$537M

Equity Value$31.1B

Shares Outstanding568M

Price per Share$54.76

Exit Multiple Method

PV of Projected FCFs$10.3B

PV of Terminal Value$33.4B

Enterprise Value$43.8B

(-) Net Debt$537M

Equity Value$43.2B

Shares Outstanding568M

Price per Share$76.15

Pure Model Fair Value

$65.45

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%
5.51%	$83.51	$88.45	$95.36	$105.70	$101.88
6.51%	$70.91	$73.56	$76.97	$81.51	$87.86
7.51%	$61.90	$63.50	$65.45	$67.89	$71.03
8.51%	$54.96	$55.99	$57.22	$58.69	$60.49
9.51%	$49.34	$50.05	$50.87	$51.83	$52.96

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

$53.52

124.8% vs current

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

Base Case

$65.45

174.9% vs current

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

Bull Case

$78.93

231.5% 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 Growth4.21%

Year 3 Revenue Growth4.21%

Year 5 Revenue Growth1.38%

Year 7 Revenue Growth2.03%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin17.30%

Terminal EBIT Margin22.00%

Tax Rate29.79%

Historical Capex / Rev5.42%

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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