On the four Ms, Madison Square Garden Sports earns 13 for management and 42 for moat. The management score rests on a return on invested capital of 1.3% and a gross margin of 27.7% — figures that describe capital earning less than it costs to employ. Shareholder equity is negative, so the debt-to-equity figure is not meaningful here — usually the mark of heavy buybacks rather than distress, but worth checking. The moderate moat and weak management are not the same judgement, and the gap between them is where the argument about this business sits.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 15.0% a year, below the 23.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 30.0x. That produces an intrinsic value of $9.60, a 10-CAP price of $24.00 and a payback time price of $37.89, with the value zone set at the highest of the three, $37.89. Today's price of $399.19 is 954% above it.
The price is above the value zone and the business scores 42 for moat and 13 for management. Neither test argues for paying up here.
| Price | $399.19 |
| Market cap | $9.6B |
| P/E ratio | 1247.5x |
| Return on invested capital | 1.3% |
| Gross margin | 27.7% |
| Debt to equity | -4.34x |
| Free cash flow yield | 0.6% |
| Growth rate used | 15.0% |
| Growth rate measured | 23.0% |
| Exit multiple assumed | 30.0x |
| Company | Moat | Buy price |
| TKO Group Holdings (TKO) | 90 | $138.63 |
| Warner Music Group Corp-Cl A (WMG) | 61 | $19.12 |
| Fox Corporation (Class B) (FOX) | 49 | $38.98 |
| Fox Corporation (FOXA) | 47 | $87.09 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Madison Square Garden Sports rather than accepting ours.