Markets Didn’t Bodyslam This Stock

Proprietary Data Insights

Financial Pros Top Live Entertainment Stock Searches This Month

Rank Name Searches
#1 Amc Entertainment Holdings Inc 24,696
#2 Walt Disney Company 1,995
#3 Live Nation Entertainment 279
#4 World Wrestling Entertainment 76
#5 Seaworld Entertainment Inc Company 40

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Stock Analysis

Markets Didn’t Bodyslam This Stock

Searches for World Wrestling Entertainment (WWE) stock are typically far and few between, whether it’s retail or financial pros.

Yet, the recent resignation of long-time CEO Vince McMahan brought the company into the spotlight, and not for the first time.

After allegations of misconduct, McMahan stepped down from his post.

Subsequently, search volume for the company spiked as traders began searching out the story.

What’s interesting is that despite a difficult year for most stocks, shares of WWE are up almost 27%.

It intrigued us to look further into the company and see whether it was worth an investment pick.

 

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WWE’s Business

WWE is a media and entertainment company. It puts on wrestling shows across the globe. Some of its most famous employees include Hulk Hogan, The Rock, “Stone Cold” Steve Austin, Andre The Giant, and John Cena. 

The company operates its business into three segments, they include Media, Live Events, and Consumer Products.

The media business covers movie production, long-form content, the WWE network, broadcast TV, and PPV, as well as, digital and social media. 

Live events business includes sales and tickets, and special packages centered around live Wrestling events. 

In the consumer products segment, we find merchandising of WWE branded products, such as video games, toys, clothing, books, and e-commerce products. 

Of the varios segments, the media business is clearly the firm’s biggest driver of revenue, accounting for 83.4% of the company’s 2020 revenues.

Financials

WWE has been able to double its revenues in the last eight years. And has been able to grow revenues every year for the last decade. 

In addition, the company is experiencing its high gross margin in history, clocking in at 44.5%

 

 

The WWE grew revenues (YoY) by 23.07%, which is significantly better than the sector median of 12.97%. Over the last 5-years, WWE achieved an average of 8.17%.

What’s even more impressive is the company’s EBITDA growth (YoY) which stands at 20.68%, compared to the sector median of 6.29%. 

This is largely due to the expanded gross and operating margins in the last few years. Yet, cash flow didn’t increase much, meaning that the lower expenses were likely non-cash related items.

Debt isn’t a heavy burden with total debt of $633.7 million total cash sitting at $447 million. Meanwhile, the company boasts a market cap north of $4.76 billion. 

WWE has a current ratio of 1.52x and a quick ratio of 1.42x. Any figure higher than 1 indicates that the company has enough reserves to handle its short-term liabilities.  

 

Valuation

WWE has a P/E ratio of 28.13x, which is actually higher than the sector median of 17.01x. However, it has dropped considerably, from the 5-year average of 61.44x. 

Furthermore, WWE has a price-to-cash-flow ratio of 23.32x, which is an improvement from its 5-year average of 27.92x. Yet, that’s still much higher than the sector median of 8.16x. Thankfully the forward price-to-cash flow improves to 15.48x.

 

What’s interesting is the WWE has a better price-to-cash flow than Madison Square Garden (MSG) and Netflix. 

 

Additionally, WWE boasts better gross profit margins than NFLX. It also has a better EBITDA margin, EBIT margin, and Net income margin than MSGS, AMC, and NFLX. 

Interestingly, the YoY revenue growth of 23.07% beats both Warner Brothers (WBD) and NFLX.  

 

Our Opinion – 6/10

While this stock certainly has performance on its side, the valuations are quite rich at these levels.

What’s equally troubling is that cash flow hasn’t improved alongside margins, at least to the same degree.

We do like the growth trajectory of the company and its ability to gain more fans throughout the years.

Yet, this is a stock we’d rather pick up at half its current value.

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