Warner Music Group (NasdaqGS:WMG) - Share price, News & Analysis

WMG fundamental analysis
Snowflake Score
Valuation	1/6
Future Growth	4/6
Past Performance	2/6
Financial Health	1/6
Dividends	2/6

WMG Stock Overview

Warner Music Group Corp. operates as a music entertainment company in the United States, the United Kingdom, Germany, and internationally.

Rewards

Trading at 16.2% below our estimate of its fair value

Earnings are forecast to grow 18.59% per year

Became profitable this year

Risk Analysis

Debt is not well covered by operating cash flow

Dividend of 2.15% is not well covered by earnings

Significant insider selling over the past 3 months

Warner Music Group Competitors

Sony Group

NYSE:SONY

US$109.2b

Universal Music Group

ENXTAM:UMG

€37.2b

Price History & Performance

Summary of all time highs, changes and price drops for Warner Music Group
Historical stock prices
Current Share Price	US$27.96
52 Week High	US$50.23
52 Week Low	US$24.39
Beta	0
1 Month Change	-10.39%
3 Month Change	-23.38%
1 Year Change	-21.99%
3 Year Change	n/a
5 Year Change	n/a
Change since IPO	-7.17%

Recent News & Updates

May 22

Warner Music Group: Slow But Steady, Don't Forget About This Music Leader

Shares of Warner Music Group have fallen in sympathy with the markets this year, down ~30% YTD. Fundamental performance, however, remains solid. The company is experiencing growth in streaming revenue while the return of concerts and festivals is boosting music sales. Profitability continues to grow as well, fueling Warner Music Group's recently raised dividend. Its 2% yield offers investors a decent reward for remaining patient.

May 18

Warner Music Group's (NASDAQ:WMG) Returns On Capital Are Heading Higher

What are the early trends we should look for to identify a stock that could multiply in value over the long term...

Shareholder Returns

	WMG	US Entertainment	US Market
7D	-4.0%	0.8%	1.0%
1Y	-22.0%	-48.7%	-15.1%

Return vs Industry: WMG exceeded the US Entertainment industry which returned -49.8% over the past year.

Return vs Market: WMG underperformed the US Market which returned -13.2% over the past year.

Price Volatility

Is WMG's price volatile compared to industry and market?
WMG volatility
WMG Average Weekly Movement	8.0%
Entertainment Industry Average Movement	12.4%
Market Average Movement	7.8%
10% most volatile stocks in US Market	16.8%
10% least volatile stocks in US Market	2.9%

Stable Share Price: WMG is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 8% a week.

Volatility Over Time: WMG's weekly volatility (8%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1929	5,900	Steve Cooper	https://www.wmg.com

Warner Music Group Corp. operates as a music entertainment company in the United States, the United Kingdom, Germany, and internationally. The company operates through Recorded Music and Music Publishing segments. The Recorded Music segment is involved in the discovery and development of recording artists, as well as related marketing, promotion, distribution, sale, and licensing of music created by such recording artists; markets its music catalog through compilations and reissuances of previously released music and video titles, as well as previously unreleased materials; and conducts its operation primarily through a collection of record labels, such as Warner Records and Atlantic Records, as well as Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Fueled by Ramen, Nonesuch, Parlophone, Reprise, Roadrunner, Sire, Spinnin’ Records, Warner Classics, and Warner Music Nashville.

Warner Music Group Fundamentals Summary

How do Warner Music Group's earnings and revenue compare to its market cap?
WMG fundamental statistics
Market Cap	US$14.40b
Earnings (TTM)	US$363.00m
Revenue (TTM)	US$5.71b

39.7x

P/E Ratio

2.5x

P/S Ratio

Is WMG overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
WMG income statement (TTM)
Revenue	US$5.71b
Cost of Revenue	US$2.95b
Gross Profit	US$2.76b
Other Expenses	US$2.39b
Earnings	US$363.00m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	0.71
Gross Margin	48.32%
Net Profit Margin	6.36%
Debt/Equity Ratio	2,214.5%

How did WMG perform over the long term?

See historical performance and comparison

Dividends

2.1%

Current Dividend Yield

81%

Payout Ratio

Valuation

Is Warner Music Group undervalued compared to its fair value and its price relative to the market?

Valuation Score

1/6

Valuation Score 1/6

Below Fair Value
Significantly Below Fair Value
PE vs Industry
PE vs Market
PEG Ratio
PB vs Industry

16.2%

Undervalued compared to fair value

Share Price vs. Fair Value

Below Fair Value: WMG ($27.96) is trading below our estimate of fair value ($33.35)

Significantly Below Fair Value: WMG is trading below fair value, but not by a significant amount.

Price To Earnings Ratio

PE vs Industry: WMG is poor value based on its Price-To-Earnings Ratio (39.7x) compared to the US Entertainment industry average (23.8x).

PE vs Market: WMG is poor value based on its Price-To-Earnings Ratio (39.7x) compared to the US market (14.9x).

Price to Earnings Growth Ratio

PEG Ratio: WMG is poor value based on its PEG Ratio (2.1x)

Price to Book Ratio

PB vs Industry: WMG is overvalued based on its Price-To-Book Ratio (93.5x) compared to the US Entertainment industry average (1.9x).

Future Growth

How is Warner Music Group forecast to perform in the next 1 to 3 years based on estimates from 17 analysts?

Future Growth Score

4/6

Future Growth Score 4/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

18.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: WMG's forecast earnings growth (18.6% per year) is above the savings rate (1.9%).

Earnings vs Market: WMG's earnings (18.6% per year) are forecast to grow faster than the US market (12.1% per year).

High Growth Earnings: WMG's earnings are forecast to grow, but not significantly.

Revenue vs Market: WMG's revenue (9.8% per year) is forecast to grow faster than the US market (7.7% per year).

High Growth Revenue: WMG's revenue (9.8% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: WMG's Return on Equity is forecast to be very high in 3 years time (92.2%).

Past Performance

How has Warner Music Group performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-9.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: WMG has high quality earnings.

Growing Profit Margin: WMG became profitable in the past.

Past Earnings Growth Analysis

Earnings Trend: WMG's earnings have declined by 9% per year over the past 5 years.

Accelerating Growth: WMG has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: WMG has become profitable in the last year, making it difficult to compare its past year earnings growth to the Entertainment industry (7.1%).

Return on Equity

High ROE: Whilst WMG's Return on Equity (214.45%) is outstanding, this metric is skewed due to their high level of debt.

Financial Health

How is Warner Music Group's financial position?

Financial Health Score

1/6

Financial Health Score 1/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: WMG's short term assets ($1.9B) do not cover its short term liabilities ($3.1B).

Long Term Liabilities: WMG's short term assets ($1.9B) do not cover its long term liabilities ($4.5B).

Debt to Equity History and Analysis

Debt Level: WMG's net debt to equity ratio (1991.9%) is considered high.

Reducing Debt: WMG's debt to equity ratio has increased from 1468% to 2214.5% over the past 5 years.

Debt Coverage: WMG's debt is not well covered by operating cash flow (12.8%).

Interest Coverage: WMG's interest payments on its debt are well covered by EBIT (5.5x coverage).

Balance Sheet

Dividend

What is Warner Music Group current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

2.15%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: WMG's dividend (2.15%) is higher than the bottom 25% of dividend payers in the US market (1.57%).

High Dividend: WMG's dividend (2.15%) is low compared to the top 25% of dividend payers in the US market (4.06%).

Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, WMG has been paying a dividend for less than 10 years.

Growing Dividend: WMG's dividend payments have increased, but the company has only paid a dividend for 2 years.

Earnings Payout to Shareholders

Earnings Coverage: At its current payout ratio (80.8%), WMG's payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its high cash payout ratio (594.1%), WMG's dividend payments are not well covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

7.3yrs

Average management tenure

CEO

Steve Cooper (75 yo)

10.75yrs

Tenure

US$10,744,727

Compensation

Mr. Stephen Forbes Cooper, also known as Steve, is the Trustee of The Paley Center for Media. Mr. Cooper has been the Chief Executive Officer of Warner Music Group Corp. since August 18, 2011 and has been...

CEO Compensation Analysis

Compensation vs Market: Steve's total compensation ($USD10.74M) is about average for companies of similar size in the US market ($USD13.26M).

Compensation vs Earnings: Steve's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: WMG's management team is seasoned and experienced (7.3 years average tenure).

Board Members

Experienced Board: WMG's board of directors are considered experienced (9.4 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: WMG insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/05/25 00:00
End of Day Share Price	2022/05/25 00:00
Earnings	2022/03/31
Annual Earnings	2021/09/30