Fairfax Media ($FXJ.ASX) is an ASX-listed media company. $FXJ.ASX has extensive operations in both the Australian and New Zealand markets. $FXJ.ASX is trading toward the bottom of their 52-week range. How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher valuation model of $FXJ.ASX with interactive assumptions

Valuecruncher produces a valuation of A$1.68 for $FXJ.ASX. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 20.0% above the current share price of A$1.40. All of the figures below are in Australian dollars (A$).

Assumptions

• Revenue: Reuters aggregates nine analysts covering $FXJ.ASX and the mean estimates of 2009 and 2010 revenues are A$2.94 billion and A$3.08 billion respectively. For our analysis we have used A$2.85 billion in 2009, A$2.90 billion in 2010 and A$3.0 billion in 2011.
• Profitability: We have used an EBITDA margin of 25.0% in 2009 rising to 26.0% in 2011. Reuters has $FXJ.ASX‘s EBITD margin at 28.5% last year and averaging 26.4% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of A$120.0 million per annum moving forward.
• Discount Rate: 11.0%. We believe a discount rate in the 10-12% range is appropriate. We have chosen the middle of this range.
• Terminal Growth Rate: 1.0%.

Our analysis incorporates the cash and debt on the $FXJ.ASX balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None