DISCA/DISCK - Discovery Communications

[muscleman]

Then just give OIBDA a lower multiple on what you feel this kind of content business should be worth.  Otherwise you will ignore real near term cash flow that can be reinvested at attractive returns.  It's also how Discovery views their operating performance, as well as most other content stocks.  Leverage is a factor here too which is why the P/E doesn't mean a heck of a lot.

 

By the way, I'd pay 15x for a 15% EPS grower all day.  Not sure how long estimates are for 15% growth, but clearly that's not in the current stock price.  it's kind of a pet peeve of mine when people mention earnings growth without saying for how long.  It's kind of a useless figure.

 

Good point. How long do you estimate DISCK's 15% growth run way to be?  :)

[dwy000]

Sorry for a dumb question. Discovery's P/E is about 15 and the projected EPS growth is about 15% as well. Why do you think this is undervalued?  :P

 

It's not necessarily undervalued in the "buying dollars for 60 cents" perspective.  But it fits the "great company at a fair price" description perfectly.  Phenomenal brand(s), global distribution, excellent leadership, shareholder friendly management, etc.  15x earnings isn't necessarily cheap, but for a company growing revenues and earnings so consistently, with great capital allocators at the helm I put it in the bargain category.  It historically has normally traded in the 20x range for these reasons, even in higher interest rate environments.

 

 

Good point. A couple of questions regarding this.

1. Malone said he expected US revenue growth to accelerate. I didn't quite understand that. Could you help me gain some insight?

2. How should I analyze content companies in general? What are the most important metrics that I should track?

3. The other member said in this thread that he did research on DISCK but bought Fox instead. How would you compare DISCK with Fox or Lions Gate?

 

 

Thank you!

 

I'm far from an expert - just along time observer and shareholder so take everything with a big grain of salt!

 

1. Advertising in the US has been really poor for the past year or two.  It is showing signs of life again (plus, this is an election year).  Ratings have also been stabilizing or improving depending on the channel.  That on top of contractual step ups in carriage fees should allow for decent revenue growth.

 

2. Most of the content companies are a combination of carry fees and advertising.  Some are more dependent on ads and some on fees.  Carry fees are generally set in multi year contracts and in bundles so the more "must carry" channels you have the better.  Must carry is shifting with the viacoms of the world in a bit of a decline (MTV and Comedy aren't what they used to be and teens have growing options) and others growing (like an AMC which rode the strength of Mad Men and Breaking Bad to contract negotiations).  I'd put Discovery into the definite must have group given the diversity, number and strength of their channels.  You are very right to be focusing on content costs though.  Everyone is trying to become must have and create unique owned content which is driving up costs (but great for users since quality is improving) - see Netflix, Amazon, HBO, Encore, etc which all used to just distribute other peoples content until they realized that adds no value and they could be replaced.

 

3. Fox is a different animal but a great (and cheap) company.  They have the network, news and a ton of sports which is huge value.  Lions Gate is more a production company than distribution channel.  It is very hit based.  I imagine them getting combined with Starz in the next year or so (great distribution/no content, combined with great content/no distribution).

 

There is a great interview on YouTube with Walter Isaacson interviewing John Malone and David Zazlov where they talk about this and the key to success for content companies. Highly recommended.

[dorsiacapital]

 

I'm far from an expert - just along time observer and shareholder so take everything with a big grain of salt!

   

1. Advertising in the US has been really poor for the past year or two.  It is showing signs of life again (plus, this is an election year).  Ratings have also been stabilizing or improving depending on the channel.  That on top of contractual step ups in carriage fees should allow for decent revenue growth.

 

2. Most of the content companies are a combination of carry fees and advertising.  Some are more dependent on ads and some on fees.  Carry fees are generally set in multi year contracts and in bundles so the more "must carry" channels you have the better.  Must carry is shifting with the viacoms of the world in a bit of a decline (MTV and Comedy aren't what they used to be and teens have growing options) and others growing (like an AMC which rode the strength of Mad Men and Breaking Bad to contract negotiations).  I'd put Discovery into the definite must have group given the diversity, number and strength of their channels.  You are very right to be focusing on content costs though.  Everyone is trying to become must have and create unique owned content which is driving up costs (but great for users since quality is improving) - see Netflix, Amazon, HBO, Encore, etc which all used to just distribute other peoples content until they realized that adds no value and they could be replaced.

 

3. Fox is a different animal but a great (and cheap) company.  They have the network, news and a ton of sports which is huge value.  Lions Gate is more a production company than distribution channel.  It is very hit based.  I imagine them getting combined with Starz in the next year or so (great distribution/no content, combined with great content/no distribution).

 

There is a great interview on YouTube with Walter Isaacson interviewing John Malone and David Zazlov where they talk about this and the key to success for content companies. Highly recommended.

 

Good points, a few things.

 

-Do you have a link for the point that ratings are increasing? As far as I know, it's been a relatively steady downward trend.  But if all ratings trend down, then advertising revenues may still stay constant.  The real issue is cord cutting, which takes away carriage fees.  The cable providers have more direct ways of making up for this(switching to a per GB payment approach to internet)...content producers, although still important, may have a bit more work to do.

 

-I don't think that increasing competition significantly drives up the costs of content production for television series.  If hollywood executives knew what shows would be hits, then yes, that would start a bidding war (one reason why sports rights are so expensive, they're the only guaranteed hits), but in general, nobody knows anything. The real issue with increasing competition is that there are a limited number of eyeball hours to distribute among an ever increasing amount of content...

 

-I think your point on Starz is a little outdated. Survivor's Remorse, Power, Outlander, are all pretty good pieces of content, although obviously the more the merrier. Starz certainly doesn't have an HBO like library of shows.

 

-I continue to think it's important that Discovery is basically exclusively a set of reality TV channels.  That is a somewhat different kind of content than scripted drama.

 

There's several interesting recent articles on specific issues with reality TV content declining b/c it is less durable than scripted.

 

This is the best article (http://www.vulture.com/2015/09/reality-tv-boom-days-are-over.html) and it has the following key quote:

 

What’s more, the high cost of scripted programming has been somewhat offset by the fact that Netflix, Hulu, and Amazon are now willing to shell out significant sums for streaming rights to comedies and dramas — but, increasingly, not reality shows. A Bloomberg article last spring noted a decision by Amazon Prime to end a streaming deal for MTV Networks reality shows such as Teen Mom. And around the same time, Netflix’s Sarandos seemed dismissive of the genre when he told an investor conference in May that reality “hasn’t been a great category for us” because “reality basically doesn’t have much of a long shelf life.”

 

Others say the same thing, although less detailed

 

http://www.latimes.com/entertainment/tv/la-et-st-reality-television-20141228-story.html

 

http://www.ew.com/article/2014/10/31/reality-tv

 

I still think Discovery is very intriguing at this price, as Picasso said, not a lot of 15 p/e with decent growth prospects out there...

[dwy000]

I can't really disagree with much said.

 

Will look for the comment from Zazlov on ratings.  Can't recall if it was a YouTube or interview somewhere.

 

On cord cutting, I may be off base here but I think it has been massively overblown.  The reduction in cable subs amongst the big players combined has been about 1% and is actually slowing (include Verizon and AT&T as cablecos here).  I think it was charter that showed an actual improvement last quarter.  The plethora of OTT offerings have had pretty pitiful uptake (see Dish's offering) and I tend to believe it will be more a case of cord shaving than outright cutting - which is more concerning to those without must have channels to bundle.  When you add in the cost of naked broadband which can be up to $20 more than in a cable bundle, it's just not all that appealing economically.  For the content providers like Discovery, they probably shouldn't care whether it is OTT or cable as long as they are getting paid for subs and they get the branding value.

 

Completely agree with you on shelf life of reality vs scripted.  It's no competition, especially for competition shows (less I imagine for a Gold Rush type show).

 

For Starz, they have been spending a fortune on content to play catch up.  They have a couple of winners but it is hard to say those few make it must have like an HBO or Showtime.  When they lose Disney it will be interesting to see how many people keep paying for the premium content.  I'm not sure outlander makes up for it.  They are still a movie network with some new content on the side.

 

Point taken on competition for new content.  My point on content spend was more about the cost to compete than direct competition for shows.  The cost per episode of an Outlander or Game of Thrones is enormous compared to your typical hour long drama.  It means that if you want those eyeballs the cost to compete has gone way, way up.

 

 

[rogermunibond]

dwy, thanks for posting the CNBC interview with Malone.

 

FOXA has some interesting dynamics:  SKY stake, younger Murdochs who look more interested in FCF generation than empire building of the pere, sports programming spend (they overspent for a lot of stuff) should drop in FY16-18.

[dwy000]

 

Good points, a few things.

 

-Do you have a link for the point that ratings are increasing? As far as I know, it's been a relatively steady downward trend.  But if all ratings trend down, then advertising revenues may still stay constant.  The real issue is cord cutting, which takes away carriage fees.  The cable providers have more direct ways of making up for this(switching to a per GB payment approach to internet)...content producers, although still important, may have a bit more work to do.

 

-I don't think that increasing competition significantly drives up the costs of content production for television series.  If hollywood executives knew what shows would be hits, then yes, that would start a bidding war (one reason why sports rights are so expensive, they're the only guaranteed hits), but in general, nobody knows anything. The real issue with increasing competition is that there are a limited number of eyeball hours to distribute among an ever increasing amount of content...

 

-I think your point on Starz is a little outdated. Survivor's Remorse, Power, Outlander, are all pretty good pieces of content, although obviously the more the merrier. Starz certainly doesn't have an HBO like library of shows.

 

-I continue to think it's important that Discovery is basically exclusively a set of reality TV channels.  That is a somewhat different kind of content than scripted drama.

 

There's several interesting recent articles on specific issues with reality TV content declining b/c it is less durable than scripted.

 

This is the best article (http://www.vulture.com/2015/09/reality-tv-boom-days-are-over.html) and it has the following key quote:

 

What’s more, the high cost of scripted programming has been somewhat offset by the fact that Netflix, Hulu, and Amazon are now willing to shell out significant sums for streaming rights to comedies and dramas — but, increasingly, not reality shows. A Bloomberg article last spring noted a decision by Amazon Prime to end a streaming deal for MTV Networks reality shows such as Teen Mom. And around the same time, Netflix’s Sarandos seemed dismissive of the genre when he told an investor conference in May that reality “hasn’t been a great category for us” because “reality basically doesn’t have much of a long shelf life.”

 

Others say the same thing, although less detailed

 

http://www.latimes.com/entertainment/tv/la-et-st-reality-television-20141228-story.html

 

http://www.ew.com/article/2014/10/31/reality-tv

 

I still think Discovery is very intriguing at this price, as Picasso said, not a lot of 15 p/e with decent growth prospects out there...

 

Dorsia - still looking for the youtube/interview with ratings comments but through mid-year Discovery was doing pretty well ratings-wise with record 1Q and 2Q results (note that these results come after the 2014 articles from above).  https://press.discovery.com/us/dsc/press-releases/2015/discovery-channel-sets-ratings-and-viewership-3601/

[dorsiacapital]

I can't really disagree with much said.

 

Will look for the comment from Zazlov on ratings.  Can't recall if it was a YouTube or interview somewhere.

 

On cord cutting, I may be off base here but I think it has been massively overblown.  The reduction in cable subs amongst the big players combined has been about 1% and is actually slowing (include Verizon and AT&T as cablecos here).  I think it was charter that showed an actual improvement last quarter.  The plethora of OTT offerings have had pretty pitiful uptake (see Dish's offering) and I tend to believe it will be more a case of cord shaving than outright cutting - which is more concerning to those without must have channels to bundle.  When you add in the cost of naked broadband which can be up to $20 more than in a cable bundle, it's just not all that appealing economically.  For the content providers like Discovery, they probably shouldn't care whether it is OTT or cable as long as they are getting paid for subs and they get the branding value.

 

Completely agree with you on shelf life of reality vs scripted.  It's no competition, especially for competition shows (less I imagine for a Gold Rush type show).

 

For Starz, they have been spending a fortune on content to play catch up.  They have a couple of winners but it is hard to say those few make it must have like an HBO or Showtime.  When they lose Disney it will be interesting to see how many people keep paying for the premium content.  I'm not sure outlander makes up for it.  They are still a movie network with some new content on the side.

 

Point taken on competition for new content.  My point on content spend was more about the cost to compete than direct competition for shows.  The cost per episode of an Outlander or Game of Thrones is enormous compared to your typical hour long drama.  It means that if you want those eyeballs the cost to compete has gone way, way up.

 

Great points! I do think the cord cutting argument was somewhat overblown. I did well buying the media stock selloff in the spring. People will still want to watch content and they'll have to pay for it some way or other.

 

I think Starz is quite interesting. My totally unfounded thesis is that the loss of Disney deal won't actually hurt them that much. I think the kind of person who subscribes to Starz just wants to get all the premium channels (or else is a fan of their series programming) and won't notice the loss of Disney that strongly. On the other hand, Disney obviously has a clearly defined stream of content that a Warner Brothers or Universal wouldn't. 

 

I hadn't thought about viewer expectations for cost of production. One strong point in favor of discovery is that I don't think there will be increasing expectations for the quality of production on their programming.

 

And thanks for the ratings link!

[Jurgis]

There is a great interview on YouTube with Walter Isaacson interviewing John Malone and David Zazlov where they talk about this and the key to success for content companies. Highly recommended.

 

I like Malone. I don't like Zaslav. Malone presents the situation as it is and looks for ways to win. He also respects his competition even if they are doing things he doesn't like. Zaslav is just whining about Netflix and about other content companies who sell their content to Netflix. Come on, the Earth won't collapse just because your competitors will sell their content to Netflix.  ::) And OMG Netflix doesn't show commercials, the infidels!

[jay21]

There is a great interview on YouTube with Walter Isaacson interviewing John Malone and David Zazlov where they talk about this and the key to success for content companies. Highly recommended.

 

I like Malone. I don't like Zaslav. Malone presents the situation as it is and looks for ways to win. He also respects his competition even if they are doing things he doesn't like. Zaslav is just whining about Netflix and about other content companies who sell their content to Netflix. Come on, the Earth won't collapse just because your competitors will sell their content to Netflix.  ::) And OMG Netflix doesn't show commercials, the infidels!

 

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

[dorsiacapital]

There is a great interview on YouTube with Walter Isaacson interviewing John Malone and David Zazlov where they talk about this and the key to success for content companies. Highly recommended.

 

I like Malone. I don't like Zaslav. Malone presents the situation as it is and looks for ways to win. He also respects his competition even if they are doing things he doesn't like. Zaslav is just whining about Netflix and about other content companies who sell their content to Netflix. Come on, the Earth won't collapse just because your competitors will sell their content to Netflix.  ::) And OMG Netflix doesn't show commercials, the infidels!

 

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

 

So then all the premium cable channels (HBO et. al.) are also destructive to content co's economics?

[jay21]

There is a great interview on YouTube with Walter Isaacson interviewing John Malone and David Zazlov where they talk about this and the key to success for content companies. Highly recommended.

 

I like Malone. I don't like Zaslav. Malone presents the situation as it is and looks for ways to win. He also respects his competition even if they are doing things he doesn't like. Zaslav is just whining about Netflix and about other content companies who sell their content to Netflix. Come on, the Earth won't collapse just because your competitors will sell their content to Netflix.  ::) And OMG Netflix doesn't show commercials, the infidels!

 

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

 

So then all the premium cable channels (HBO et. al.) are also destructive to content co's economics?

 

No. They charge higher prices than NFLX as an add-on to the current bundle. Very different.

[dorsiacapital]

I was responding to your specific point that "not showing ads" is destructive because it "conditions viewers not to expect ads." I see no distinction between Netflix and premium channels on that front.  If you can create good enough content that people will pay you directly to watch it, then I think you are on the side of angels and deserve whatever profits you get.

 

Premium channels are about 10-15 dollars as an add-on; Netflix is a 8-10 dollar add on to your internet bill, creating a "skinny bundle" - I don't see much difference there.

 

I do think Zaslav is right that the content companies were not strategic about addressing new distribution models. Seems like an example of the Innovator's Dilemma.  Broadcast networks' neglect of Hulu for many years was a strange decision - although they're fixing that now.

[dwy000]

There is a great interview on YouTube with Walter Isaacson interviewing John Malone and David Zazlov where they talk about this and the key to success for content companies. Highly recommended.

 

I like Malone. I don't like Zaslav. Malone presents the situation as it is and looks for ways to win. He also respects his competition even if they are doing things he doesn't like. Zaslav is just whining about Netflix and about other content companies who sell their content to Netflix. Come on, the Earth won't collapse just because your competitors will sell their content to Netflix.  ::) And OMG Netflix doesn't show commercials, the infidels!

 

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

 

Zaslov made an interesting comment early on related to this.  He said that they earn $2.2bn in distributor fees and that covers the content cost.  Then all the advertising is earnings.  That is a really interesting point when looking at Netflix as an outlet for content.  If there is no advertising accruing to the content provider and all they are getting is the distributor fee, then there is no profit.  So something has to give.  Either you reduce content cost to generate a return or you significantly increase the fee you charge the distributor.  In a fight for eyeballs, content costs are going in one direction at the moment, with hour long dramas costing what it used to cost to shoot an entire movie.  So either you need advertising or the price being charged to the distributor is going to go up substantially.  This is the issue for Netflix and it's already started with price wars between them and Amazon Prime for old and dated content. 

 

As Malone stated, the sale of content to Netflix has so far been based on "how bad do you need the cash".  If the distribution fees from cable start declining as people churn off of cable, or advertising declines because ratings drop then Netflix, instead of being the place where you can get some cash for stale inventory that otherwise sits on the shelf, becomes the next place you squeeze.

[Jurgis]

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

 

Screw content companies and their economics if they cannot figure out a way to function without ads.

 

I've been "conditioned" not to expect ads and I won't watch 5-minutes-show-5-minutes-ads crap ever again.

[Spekulatius]

 

Screw content companies and their economics if they cannot figure out a way to function without ads.

 

I've been "conditioned" not to expect ads and I won't watch 5-minutes-show-5-minutes-ads crap ever again.

 

+ 1

 

I hate being bombarded with ads in high frequency, it's so disruptive to the viewing experience. That's why I watch my shows with the DVR exclusively. It's also the reason why I like Netflix that much

[jay21]

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

 

Screw content companies and their economics if they cannot figure out a way to function without ads.

 

I've been "conditioned" not to expect ads and I won't watch 5-minutes-show-5-minutes-ads crap ever again.

 

Would you rather pay more for cable or have ads?

 

EDIT: You can still get free OTA tv because of ads. It's like the best value ever.

[dwy000]

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

 

Screw content companies and their economics if they cannot figure out a way to function without ads.

 

I've been "conditioned" not to expect ads and I won't watch 5-minutes-show-5-minutes-ads crap ever again.

 

Would you rather pay more for cable or have ads?

 

EDIT: You can still get free OTA tv because of ads. It's like the best value ever.

I don't know anyone who likes ads!  But at the end of the day the content needs to be paid for or it will stop getting made.  The alternative to ads is HBO style which is like $10-12 for a single channel.  There are not many channels that can get those kind of monthly fees as a standalone.  It is why Netflix model longer term is challenged. Either they get older and crappier content or the price needs to skyrocket. And then you've got....cable.

[Jurgis]

Actually NFLX is highly destructive to content co's economics including not showing ads which conditions viewers to not expect ads creating a downward pressure on revenue.

 

Screw content companies and their economics if they cannot figure out a way to function without ads.

 

I've been "conditioned" not to expect ads and I won't watch 5-minutes-show-5-minutes-ads crap ever again.

 

Would you rather pay more for cable or have ads?

 

EDIT: You can still get free OTA tv because of ads. It's like the best value ever.

I don't know anyone who likes ads!  But at the end of the day the content needs to be paid for or it will stop getting made.  The alternative to ads is HBO style which is like $10-12 for a single channel.  There are not many channels that can get those kind of monthly fees as a standalone.  It is why Netflix model longer term is challenged. Either they get older and crappier content or the price needs to skyrocket. And then you've got....cable.

 

To answer to all questions:

 

- I don't pay for cable and don't plan to in the future. (To provide context: we get Netflix, Netflix DVD/BluRay and Amazon Prime. Don't even have time to watch Amazon - there's way too much stuff on Netflix and Netflix DVD.)

- If Netflix model does not survive - and I think both Zaslav and you guys are crying wolf way too much - then I'll consider the available alternatives. One alternative is just not to get the content at all. :) Another alternative is some kind of video on demand rentals.

 

I think I agree with the underlying thread that Netflix is in tough spot as their content costs may be way too high for their cash inflows. If you add the valuation, it's not an attractive investment. But that's OT here.

 

Content companies - that's where it gets tough. They are being squeezed a bit. They might get squeezed more. The valuations have contracted though, so there's some match of expectations and reality. Good companies will figure out how to deal with it. Whether they will grow at good rates and have good margins is a 64M question. I think DISCA will do fine even though Vaslav spreads FUD like there's no tomorrow.

 

And BTW, there's definitely a content glut. Not much would be lost if companies closed half of the existing channels or even more. ;) But that's just IMHO.  8)

[dwy000]

Cable co's could effectively kill Netflix overnight by offering up cable on-demand for a fixed monthly fee and then getting rid of unlimited broadband (charge by the Gig).

[fareastwarriors]

Discovery Communications Wants to Be the ESPN of Europe

 

Out of the game in the U.S., cable player known for shows like ‘Shark Week’ looks to boost presence overseas

 

 

 

http://www.wsj.com/articles/discovery-communications-wants-to-be-the-espn-of-europe-1452567094

[Jurgis]

Swapped DISCA to DISCK, over 5% spread.

 

Swapped back from DISCK to DISCA, spread down to 1%.

[Jurgis]

Swapped DISCA to DISCK, over 5% spread.

 

Swapped back from DISCK to DISCA, spread down to 1%.

 

Swapped DISCA to DISCK, 4.8% spread.

[muscleman]

Could anyone please help me understand why there is such a EPS discrepancy in these two 10-ks?

 

https://www.sec.gov/Archives/edgar/data/1437107/000143710715000004/disca-2014123110k.htm#sFC1C6F447485AC7E98FAB0547BACF3CF

Page 63.

 

It says 2013 total net income 1,075 and EPS 1.49 diluted.

 

https://www.sec.gov/Archives/edgar/data/1437107/000143710714000016/disca-2013123110k.htm#sDD095D2A3A916F058036153FCEDF2D15

Page 55

 

It says 2013 total net income 1,075 and EPS 2.97 diluted.

 

 

Also in that same page, Weighted average shares outstanding for 2013 is 722 diluted in the first link and 361 in the second link.  >:(

[Jurgis]

Because they did the DISCA/DISCK split at the time which doubled the shares outstanding? Yahoo says Aug 7, 2014.

[muscleman]

If rev's continue growing around 10% this is a decent entry point for long term investors. Good amount of share buybacks, the only negative is high leverage. FCF/Share keeps increasing , 27% FCF/Revenue ratio

 

FCF: $1.5B

Mkt cap: 352mn shares x 67 ~ $23.5B market cap

 

I apologize for my ignorance as I have done little research here, but could you provide some more detail as to how you get to 1.5B of FCF? 

 

Thanks.

 

I made a mistake and as per my latest calculations it should be 1.36B , earlier I did a rough calculation of

 

(TTM EBITDA ($2354mn) - Maintenance capex ($117mn))*(1 - 0.33) = $1476mn.

 

My mistake being I did not adjust Changes to working capital and DISCK has consistently high -ve working capital changes. After you asked the question, I went back to look at the details. These are my caluculations

 

Numbers are from latest 10-K. Everything is in millions

 

 

FCF: EBIT - Taxes + Depr & Amortization - Changes in Net working capital - maintenance capex

 

 

EBIT/ Op Income: 1998

 

Provision for taxes: 659

 

Depreciation: 276

 

Content Amortization & Impairment: 1190

 

Changes in working capital: -95 [ Adding this back in the formula below ]

 

Content rights: 1426 [ IMO this should be treated as maintenance capex, based on previous 3 years this has been consistently increasing and they are spending working capital on this. One can argue that this is growth capex, but we don't know what will happen when it stops.  It's up to your judgement ]

 

Property and equipment: 117

 

1998 - 659 + 276 + 1190 + 95 - 1426 - 117 = 1357mn

 

Also when i look at the numbers, FCF is 25% of revenue I like firms that have consistently large percentage of revenue as FCF. Buybacks are great. The high leverage worries me a bit and i need to do some comparisons. I am still doing my research

 

Why not include interest expense into this formula?