Warner Music Group Corp. Class A Common Stock (WMG)

FairStock Score: 39/100 — MIXED

Key Financials

Strengths

• Generates $731 million in annual free cash flow (4.9% yield on market cap)
• Strong Piotroski F-Score of 8/9 indicating robust financial health across profitability, leverage, and efficiency metrics
• High return on equity of 39.8% demonstrating efficient capital deployment
• Attractive 2.6% dividend yield providing steady income returns

Concerns

• Trades significantly above Graham Number ($4) with negative 580% margin of safety—limited downside protection
• High leverage at 5.56x debt-to-equity increases financial risk and interest expense burden
• Altman Z-Score of 0.9 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Warner Music Group Corp. Class A Common Stock is a mid-cap communication services company valued at $15.0 billion. The business generates $6.9 billion in annual revenue with a 2.6% net margin and $731 million in free cash flow. From a quality standpoint, Warner shows near-perfect Piotroski F-Score of 8/9 indicating exceptional financial health and distressed Altman Z-Score of 0.9 warrants caution. On valuation, the stock is commanding a steep 50.9x multiple, with trades far above its Graham Number ($4) with no margin of safety. Growth dynamics show revenue growing at 10.4% and profit growth of -25.4%. The 2.6% dividend yield adds an income component for patient holders. Our composite FairStock Score of 39/100 reflects below-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $731 million in annual free cash flow (4.9% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

At 51x earnings, any growth disappointment triggers rapid multiple compression—a 20% earnings miss plus multiple contraction to 20x implies 40%+ downside. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer