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Universal Music Group NV UMG

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Stock XAMS Rating as of
€21.34 −0.36 (1.66%)
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Company Report

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Universal Music: A Good Quarter, With Areas of Softness That Have No Impact on Our Long-Term View

Matthew Dolgin

Universal Music posted strong second-quarter sales and adjusted EBITDA, but growth from subscription streaming service recordings, the firm's biggest source of revenue, decelerated, and free cash flow was weak. We believe free cash flow will improve significantly in the second half, which is seasonally stronger, and quarterly vacillations in growth rates don't change our view that there is significant long-term growth ahead for streaming revenue. We are maintaining our EUR 31 fair value estimate, leaving shares modestly undervalued in our view.

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Price vs Fair Value

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UMG is trading at a 570% premium.
Price
€21.70
Fair Value
€48.00
Uncertainty
Medium
1-Star Price
€19.24
5-Star Price
€87.10
Economic Moat
Jbdct
Capital Allocation
Xkzkhhcjb

Bulls Say, Bears Say

Bulls

Talent will always be at the core of music industry sales. Record labels are critical for artists to maximize success, and Universal is the best positioned of any record company.

Bears

Record companies’ favorable revenue-sharing agreements with streaming platforms may not allow those platforms to remain viable over the long term and could require concessions.

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Trading Information

Previous Close Price
€22.14
Day Range
€20.84–22.14
52-Week Range
€19.93–29.49
Bid/Ask
€21.32 / €21.92
Market Cap
€39.03 Bil
Volume/Avg
4.5 Mil / 1.3 Mil

Key Statistics

Price/Earnings (Normalized)
24.21
Price/Sales
3.53
Dividend Yield (Trailing)
2.35%
Dividend Yield (Forward)
2.21%
Total Yield
2.35%

Company Profile

Universal Music is the largest of the three major record companies. Recorded music accounts for most of the firm’s revenue, with the segment housing more than a dozen record labels, including notable names like Interscope, Capital Music, Motown Records, and Def Jam. Some of the most successful current artists signed to record deals with Universal include Taylor Swift, Drake, The Weeknd, and Morgan Wallen. Most of Universal’s remaining revenue comes from its publishing segment, which generates revenue for songwriters and composers, including some of Universal’s recording artists as well as songwriters and composers who do not record music themselves or are attached to other labels. Universal’s publishing group has nearly 4.5 million owned or administered titles in its catalog.
Sector
Communication Services
Industry
Entertainment
Stock Style Box
Large Growth
Total Number of Employees
10,290
Website
https://www.universalmusic.com

Competitors

Valuation

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Metric
UMG
SPOT
6758
Price/Earnings (Normalized)
 24.21123.8218.11
Price/Book Value
 11.5714.472.13
Price/Sales
 3.534.211.25
Price/Cash Flow
 28.5867.528.43
Price/Earnings
UMG
SPOT
6758

Financial Strength

Metric
UMG
SPOT
6758
Quick Ratio
 0.391.520.44
Current Ratio
 0.581.560.66
Interest Coverage
 17.785.5131.03
Quick Ratio
UMG
SPOT
6758

Profitability

Metric
UMG
SPOT
6758
Return on Assets (Normalized)
 12.08%9.84%2.86%
Return on Equity (Normalized)
 54.95%29.27%13.24%
Return on Invested Capital (Normalized)
 28.19%16.13%8.27%
Return on Assets
UMG
SPOT
6758
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