Warner Music Group Corp-Cl A scores 59 for management and 61 for moat. The management score rests on a return on invested capital of 9.2% and a gross margin of 45.8% — figures that describe returns closer to the cost of the capital behind them. The balance sheet carries debt at 7.12x equity, which magnifies both the returns above and the risk beneath them. A solid moat alongside mixed management is a combination worth understanding before the price matters at all.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 8.5% a year, the rate measured from the filings. The exit multiple assumed is 17.0x. That produces an intrinsic value of $12.22, a 10-CAP price of $16.28 and a payback time price of $19.12, with the value zone set at the highest of the three, $19.12. Today's price of $27.05 is 41% above it.
The price is above the value zone and the business scores 61 for moat and 59 for management. Neither test argues for paying up here.
| Price | $27.05 |
| Market cap | $14.1B |
| P/E ratio | 21.0x |
| Return on invested capital | 9.2% |
| Gross margin | 45.8% |
| Debt to equity | 7.12x |
| Free cash flow yield | 3.0% |
| Growth rate used | 8.5% |
| Growth rate measured | 8.0% |
| Exit multiple assumed | 17.0x |
| Company | Moat | Buy price |
| TKO Group Holdings (TKO) | 90 | $138.63 |
| 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 Warner Music Group Corp-Cl A rather than accepting ours.