Should you buy News Corp?

A structurally declining business, but a large cash balance makes this a tough decision

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Since splitting its entertainment units off in a separately listed entity, Twenty-First Century Fox Inc, News Corp (ASX: NWS, NWSLV) has been going about its business.

The company’s current businesses comprise News Corp’s Australian media assets, including The Australian, The Daily Telegraph, The Herald Sun and the Courier Mail, amongst other newspapers. The company also owns Fox Sports, a 50% share of Foxtel – with Telstra Corporation Ltd (ASX: TLS) owning the other 50% – and 62% of REA Group Limited (ASX: REA).

News Corp’s international assets include Dow Jones (which owns brands such as the Wall Street Journal and Barron’s), the New York Post, HarperCollins Publishers, Amplify, storyful, as well as The Sun and the Sunday Times in the UK.

Unfortunately, that stable of assets is showing declining revenues, with the latest quarterly report showing revenues falling 5% to US$2.1 billion. That was mainly thanks to a 21% fall in Australian newspaper earnings, although 13% of that was due to the impact of exchange rates.

On the bright side, News Corp is sitting on US$3.2 billion worth of cash and has no debt.

What the company will do with its bulging cash balance is anyone’s guess, although News Corp has acquired Canadian publisher Harlequin Enterprises for C$455 million in cash. Lachlan Murdoch also owns a big chunk of Ten Network Holdings Ltd (ASX: TEN) and a bid for the company can’t be ruled out.

Until we can see a full years’ worth of earnings compared to the prior year, and have a better idea of where the company is going in the future, current shareholders may want to sit tight. With financials impacted by various one-off items and a suite of declining newspapers, it remains difficult to identify News Corp’s value. One company Motley Fool analysts have identified as cheap with bright prospects could be a better bet, and you can get the scoop for FREE below.

Motley Fool writer/analyst Mike King owns shares in Telstra. You can follow Mike on Twitter @TMFKinga

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