Time Warner – Possessing Momentum Of Growth and Success


  • Time Warner (NYSE:TWX) is an integrated media and entertainment multinational corporation which operates through three segments.
  • It is the third largest diversified entertainment company in the world.
  • The company possesses a good value of total free cash per share and total debt/equity ratio whereas the P/S ratio of the company is not so good.
  • The company has a good history of increasing dividends on yearly basis.
  • The company has enough good business for funding its operations in the long run.


Time Warner (NYSE:TWX) is an entertainment and media company operating in the US and globally. It operates through three subsidiaries – Turner, Warner Bros, and Home Box Office (HBO).

Turner operates and owns a portfolio of cable television networks, and other divisions prividing entertainment, kids, sports, news programming, and digital platforms for consumers. It operates in 200 countries through 180 channels.

Warner Bros produces, distributes and licenses television programming and feature films, as well as video games and license consumer brands and products.

HBO offers premium pay services of basic tier television including HBO and Cinemax and sells its original programming through physical and digital formats. HBO also offers home entertainment and content to international television networks.

In addition, Time Warner has gained 49 million domestic subscribers so far. The company was initially known as AOL Time Warner but it changed its name in 2003 to Time Warner. The company was founded in 1985 and headquartered in New York. There are almost 24,800 full time workers employed by Time Warner.

Stock Valuation

The market cap of Time Warner is $60.98 billion and the diluted earnings per share is 5.03. The company’s EBITDA stands at $7.95 billion with shares short of $9.74 million. Its beta is 1.12 while the float is estimated to be $776.85 million. Time Warner has insider ownership of 0.11% and institutional ownership of 83.7%. All the stock valuations for the company represent its financial stability and its current business status.

Stock Analysis

Considering its yearly revenues, Time Warner is the third largest entertainment company in the world. The company has been looking for acquisitions in order to complement its existing portfolio. Since the spin off from AOL in 2009, the company the company was not able to improve its financial shape. Various Time Warner valuations are analyzed as follows:

Price/sales ratio

The P/S ratio of the Time Warner is 2.19 in accordance with the sale of trailing 12 months. If someone is already holding this stock then the ratio is fine but if someone is thinking to purchase it, then the stock is not so good.

Total debt/equity ratio

The debt/equity of the company is 102.4%. As less debt equals less risk, this value is acceptable.

Long term earnings per share growth rate

Inflation adjusted earnings per share growth rate needs to be greater than 15% and the value for Time Warner is 13.8%, so the company does not pass this test.

Free cash per share

Companies should have a positive value of cash per share. For Time Warner, the value of free cash per share is 2.74, which is acceptable and hence company passes this test.

Three-year average net profit margin

An average net profit margin of 5% or greater than that over a time period of three years is good for the business and Time Warner’s is 13.9% which is clearly acceptable.

Our recommendations/thoughts

Time Warner still has room for success and growth and it is expected that it will continue to perform well in the coming years because it is one of the largest entertainment and multimedia machines in the industry. The company has many offers for its customers and it has been gaining momentum. Time Warner’s stock is on the recovery path after the selloff of the last year and which represents the strong opportunity to open a long position. The company can be considered as an attractive dividend player as it has always increased its dividends on a yearly basis. The company is clearly a good “buy” for all investors.

Note – All recommendations and stock analysis above are based on research conducted by the writer, therefore before making any major decision it is necessary to conduct full research on other aspects of the company.

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