Stock Analysis

Shareholders Will Be Pleased With The Quality of News' (NASDAQ:NWSA) Earnings

  •  Updated
NasdaqGS:NWSA
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The subdued stock price reaction suggests that News Corporation's (NASDAQ:NWSA) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

View our latest analysis for News

earnings-and-revenue-history
NasdaqGS:NWSA Earnings and Revenue History August 17th 2021

How Do Unusual Items Influence Profit?

For anyone who wants to understand News' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$72m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If News doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On News' Profit Performance

Unusual items (expenses) detracted from News' earnings over the last year, but we might see an improvement next year. Because of this, we think News' earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. Luckily, you can check out what analysts are forecasting by clicking here.

Today we've zoomed in on a single data point to better understand the nature of News' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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What are the risks and opportunities for News?

News Corporation, a media and information services company, creates and distributes authoritative and engaging content, and other products and services for consumers and businesses worldwide.

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Rewards

  • Trading at 31.8% below our estimate of its fair value

  • Earnings are forecast to grow 15.2% per year

Risks

  • Large one-off items impacting financial results

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