Warner Music Group Corp. Fundamental Analysis
Warner Music Group Corp. (WMG) shows moderate financial fundamentals with a PE ratio of 33.93, profit margin of 6.34%, and ROE of 67.11%. The company generates $7.2B in annual revenue with moderate year-over-year growth of 4.37%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 34.7/100 based on profitability, valuation, growth, and balance sheet metrics. The F grade reflects weak fundamentals and significant financial concerns.
Fundamental Health Score
We analyze WMG's fundamental strength across five key dimensions:
Efficiency Score
WeakWMG struggles to generate sufficient returns from assets.
Valuation Score
WeakWMG trades at a premium to fair value.
Growth Score
WeakWMG faces weak or negative growth trends.
Financial Health Score
WeakWMG carries high financial risk with limited liquidity.
Profitability Score
ModerateWMG maintains healthy but balanced margins.
Key Financial Metrics
Is WMG Expensive or Cheap?
P/E Ratio
WMG trades at 33.93 times earnings. This suggests a premium valuation.
PEG Ratio
When adjusting for growth, WMG's PEG of 29.18 indicates potential overvaluation.
Price to Book
The market values Warner Music Group Corp. at 20.78 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 8.94 times EBITDA. This is generally considered low.
How Well Does WMG Make Money?
Net Profit Margin
For every $100 in sales, Warner Music Group Corp. keeps $6.34 as profit after all expenses.
Operating Margin
Core operations generate 12.75 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $67.11 in profit for every $100 of shareholder equity.
ROA
Warner Music Group Corp. generates $4.26 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Warner Music Group Corp. produces operating cash flow of $855.60M, showing steady but balanced cash generation.
Free Cash Flow
Warner Music Group Corp. produces free cash flow of $678.65M, offering steady but limited capital for shareholder returns and expansion.
FCF Per Share
Each share generates $1.30 in free cash annually.
FCF Yield
WMG converts 4.35% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
33.93
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
29.18
vs 25 benchmark
P/B Ratio
Price to book value ratio
20.78
vs 25 benchmark
P/S Ratio
Price to sales ratio
2.16
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
6.70
vs 25 benchmark
Current Ratio
Current assets to current liabilities
0.73
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.67
vs 25 benchmark
ROA
Return on assets percentage
0.04
vs 25 benchmark
ROCE
Return on capital employed
0.15
vs 25 benchmark
How WMG Stacks Against Its Sector Peers
| Metric | WMG Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 33.93 | 24.20 | Worse (Expensive) |
| ROE | 67.11% | 959.00% | Weak |
| Net Margin | 6.34% | -68674.00% (disorted) | Weak |
| Debt/Equity | 6.70 | 3.02 | Weak (High Leverage) |
| Current Ratio | 0.73 | 1.71 | Weak Liquidity |
| ROA | 4.26% | -2558.00% (disorted) | Weak |
WMG outperforms its industry in 0 out of 6 key metrics, but lagging in P/E Ratio.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Warner Music Group Corp.'s 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
47.67%
Industry Style: Growth, Technology, Streaming
High GrowthEPS CAGR
175.51%
Industry Style: Growth, Technology, Streaming
High GrowthFCF CAGR
43.89%
Industry Style: Growth, Technology, Streaming
High Growth