FOX has had an impressive run over the past six months as its shares have beaten the S&P 500 by 13.8%. The stock now trades at $56.48, marking a 17.9% gain. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy FOX, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think FOX Will Underperform?
We’re glad investors have benefited from the price increase, but we're swiping left on FOX for now. Here are two reasons why you should be careful with FOXA and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, FOX’s sales grew at a sluggish 5.4% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect FOX’s revenue to drop by 4.4%, a decrease from its 5.4% annualized growth for the past five years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
Final Judgment
We see the value of companies helping consumers, but in the case of FOX, we’re out. With its shares topping the market in recent months, the stock trades at 14.2× forward P/E (or $56.48 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are better stocks to buy right now. We’d suggest looking at one of Charlie Munger’s all-time favorite businesses.
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