On the four Ms, TKO Group Holdings earns 53 for management and 90 for moat. The management score rests on a return on invested capital of 6.2% and a gross margin of 49.6% — figures that describe returns closer to the cost of the capital behind them. Debt sits at 1.09x equity. The wide moat and mixed 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 37.0% 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 $86.99, a 10-CAP price of $87.82 and a payback time price of $138.63, with the value zone set at the highest of the three, $138.63. Today's price of $176.04 is 27% above it.
The operating figures describe a business performing at a high level; the price asks for that performance to continue and then some. A margin of safety score of 25 is the measure of how little room that leaves for being wrong.
| Price | $176.04 |
| Market cap | $13.2B |
| P/E ratio | 60.7x |
| Return on invested capital | 6.2% |
| Gross margin | 49.6% |
| Debt to equity | 1.09x |
| Free cash flow yield | 6.9% |
| Growth rate used | 15.0% |
| Growth rate measured | 37.0% |
| Exit multiple assumed | 30.0x |
| Company | Moat | Buy price |
| Warner Music Group Corp-Cl A (WMG) | 61 | $19.12 |
| Madison Square Garden Sports (MSGS) | 42 | $37.89 |
| 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 TKO Group Holdings rather than accepting ours.