TKO Group Holdings, Inc. (NYSE: TKO)

Sector: Communication Services Industry: Entertainment CIK: 0001973266
Market Cap 17.56 Bn
P/B 4.60
P/E 76.76
P/S 4.05
ROIC (Qtr) 8.62
Div Yield % 0.70
Rev 1y % (Qtr) -27.31
Total Debt (Qtr) 4.04 Bn
Debt/Equity (Qtr) 1.06

About

Price action

Investment thesis

Bull case

  • Healthy cash reserves of 1.17B provide 15.63x coverage of short-term debt 75.07M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 1.03B provides strong 10.01x coverage of stock compensation 103.16M, indicating sustainable incentive practices.
  • Robust free cash flow of 979.98M exceeds capital expenditure of 52.67M by 18.60x, indicating strong organic growth funding capability.
  • Tangible assets of 3.65B provide exceptional 7.18x coverage of deferred revenue 507.97M, showing strong service capability backing.
  • Operating cash flow of 1.03B fully covers other non-current liabilities 102.33M by 10.09x, showing strong long-term stability.

Bear case

  • Operating cash flow of 1.03B barely covers its investment activities of (67.58M), with a coverage ratio of -15.28, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 1.03B provides thin coverage of dividend payments of (463.82M) with a -2.23 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 1.17B provide limited coverage of acquisition spending of (26.85M), which is -43.70x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating earnings of 503.15M show weak coverage of depreciation charges of 438.69M, with a 1.15 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 438.69M relative to operating cash flow of 1.03B, which is 0.42x suggests significant maintenance capital requirements affecting free cash flow.

Peer comparison

Companies in the Entertainment
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 NFLX Netflix Inc 398.09 Bn 38.16 9.18 14.46 Bn
2 DIS Walt Disney Co 204.13 Bn 16.46 2.16 42.03 Bn
3 WBD Warner Bros. Discovery, Inc. 70.69 Bn 145.75 1.87 33.52 Bn
4 FWONA Liberty Media Corp 53.12 Bn -399.43 13.15 7.04 Bn
5 LYV Live Nation Entertainment, Inc. 33.40 Bn 103.67 1.36 9.39 Bn
6 FOXA Fox Corp 33.26 Bn 16.34 2.02 6.60 Bn
7 PSKY Paramount Skydance Corp 18.94 Bn -1,353.00 0.66 14.73 Bn
8 TKO TKO Group Holdings, Inc. 17.56 Bn 76.76 4.05 4.04 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.27 1.53
EV to Cash from Ops. EV/CFO 19.14 25.10
EV to Debt EV to Debt 4.89 5.03
EV to EBIT EV/EBIT 39.28 165.24
EV to EBITDA EV/EBITDA 15.23 -156.71
EV to Free Cash Flow [EV/FCF] EV/FCF 20.17 72.07
EV to Market Cap EV to Market Cap 1.13 2.12
EV to Revenue EV/Rev 4.55 6.42
Price to Book Value [P/B] P/B 4.60 2.40
Price to Earnings [P/E] P/E 76.76 -114.33
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.49 1.03
Dividend Payout Ratio % Div Payout % (Qtr) 54.10 -17.28
Dividend per Basic Share Div per Share (Qtr) 1.52 0.14
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 12.64 7.73
Interest Coverage Int. cover (Qtr) 2.52 -38.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 58.59 -33.75
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 156.50 248.04
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.52
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -18.73 -100.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 133.70 -28.24
EBIT Growth (1y) % EBIT 1y % (Qtr) 116.14 -85.91
EBT Growth (1y) % EBT 1y % (Qtr) 1,841.47 24.10
EPS Growth (1y) % EPS 1y % (Qtr) 785.37 18.31
FCF Growth (1y) % FCF 1y % (Qtr) 57.18 118.70
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 22.06 30.85
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.28 0.60
Cash Payout Ratio Cash Payout (Qtr) 0.43 0.04
Cash Ratio Cash Ratio (Qtr) 0.77 0.45
Current Ratio Curr Ratio (Qtr) 1.46 1.09
Debt to Equity Ratio Debt/Equity (Qtr) 1.06 1.01
Interest Cover Ratio Int Coverage (Qtr) 2.51 -38.17
Times Interest Earned Times Interest Earned (Qtr) 2.51 -38.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 21.70 -65.26
EBIT Margin % EBIT Margin % (Qtr) 11.59 -79.53
EBT Margin % EBT Margin % (Qtr) 6.98 -82.47
Gross Margin % Gross Margin % (Qtr) 60.50 35.56
Net Profit Margin % Net Margin % (Qtr) 5.30 -83.18