Comps and Ratios

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Pennsylvania State University *

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831

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Finance

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Apr 3, 2024

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New York Times Pitch - Communications Sector ● Companies used in comparable analysis ○ News Corporation Class B - Worldwide but founded in Australia and Headquarters in the Unites States ■ FY+1 P/E: 28.9x ■ FY+1 EV/EBITA: 9.4x ■ Discount - News Corporation Class B (NWS) is currently trading at a discount. As of October 21, 2023, the stock price is $20.39 with a 52-week range of $15.15 to $22.14. The P/E ratio is 24.60, which indicates that the stock is trading at a lower multiple of its earnings compared to the industry average. Additionally, the stock is rated as a "BUY" according to technical analysis indicators ○ Deluxe Corporation - Minneapolis, Minnesota ■ FY+1 P/E: 6.0x ■ FY+1 EV/EBITA: 5.9x ■ Discount - Currently they are trading at $17.84. It seems sensible to think that they are trading at a discount given their extremely high debt level of 2.8. The reason for this is that businesses with large debt loads are viewed as riskier since they may find it difficult to satisfy their financial obligations in difficult economic times. The stock may trade at a discount as a result of this elevated risk, which might exacerbate stock price volatility. ○ Cimpress Plc - Dundalk, Ireland ■ FY+1 P/E: 31.5x ■ FY + EV/EBITA: 8.3x ■ Premium - Cimpress Plc (CMPR) is currently trading at a premium. The stock price of CMPR has been increasing, indicating a higher valuation compared to previous levels. As of September 25, 2023, the stock price was $72.05, which is a 35% surge in just three months. Additionally, the stock price was $52.47 on June 6, 2023, representing an 8.05% increase from the previous closing price ○ John Wiley & Sons, Inc. Class A - Hoboken, New Jewsey ■ FY+1 P/E: 16.5x ■ FY +1 EV/EBITA: 9.3x ■ Discount - Based on a two-stage Free Cash Flow to Equity study, John Wiley & Sons' predicted fair value was $60.76. The $35.63 share price of the corporation suggested that it may be 41% undervalued and hence being traded at a discount ● https://simplywall.st/stocks/us/media/nyse-wly/john-wiley-sons/ne ws/is-john-wiley-sons-inc-nysewly-trading-at-a-41-discount

● Sectors with Low P/E Ratios: ○ Financials ■ Banks and other financial institutions may have lower P/E ratios due to regulatory and economic risks, as well as the potential for fluctuations in interest rates and credit quality ○ Utilities ■ Due to controlled pricing and reliable but sluggish earnings, utilities have lower P/E ratios. In times of uncertainty, investors value this steadiness, and utility stocks are frequently attractive due to their constant dividends. ● Sectors with High P/E Ratios ○ Communications ■ The Communication Services sector includes companies that provide communication and media services, such as internet providers, cable companies, and entertainment companies. This sector is expected to have higher growth potential, leading to higher P/E ratios. The reasons being, a wide range of companies and segments, digital innovation and connectivity, as well as higher demand for faster and better connections ○ IT ■ The technology sector is known for its high-growth companies and innovative solutions, which often lead to higher P/E ratios. Other reasons include growth expectations, investment in innovation as well as market sentiment ● Sector Specific Multiple ○ Average Revenue per User ■ This multiple is often used for the telecommunications subsector of communications ■ This metric is significant in the telecoms sector since it shows how the business is performing operationally. These businesses must be able to optimize earnings while minimizing expenses related to serving each end consumer. Investors want to analyze marginal profit and cost on a unit level since telecommunications businesses are service providers rather than product producers. This will show how efficiently the company uses its resources. The better, the greater the average annual income.

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