Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Does the Endeavor Group make Money?

Strangely, you can purchase stock in the company that owns the UFC (Ultimate Fighting Championship) Endeavor Group Holdings Inc. (NYSE: EDR).

Endeavor (EDR) owns one of the oddest collections of businesses around. Its holdings include the Miss Universe beauty contest, Professional Bull Riders, the UFC, the Turkish Airlines EuroLeague a European Basketball League, Dixon Talent Inc., Kovert Creative, IMG, and SNTV .

Interesting Endeavor companies include the Wall Group. The Wall Group is a talent agency that represents hairstylists, makeup artists, and fashion stylists. IMG stages fashion shows and sporting events and operates IMG Academy a an athletic training program.

Investing in Talent

One Sixty/Ninety is an advertising, public relations, communications, and branding agency. Dixon Talent Inc represents comics. SNTV is a sports news video agency that is a joint venture between The Associated Press and IMG. Kovert Creative is a digital marketing and communications firm. Frieze is an Arts Media and Events company.

Endeavor (NYSE: EDR) has a fascinating history. In began in 1898 as the William Morris Agency a talent agency. Over the decades William Morris represented many celebrities including Elvis Presley, Marilyn Monroe, and Charlie Chaplin. Today, Endeavor’s agents represent over 6,000 people including actors, artists, athletes, and writers.

Another Endeavor predecessor IMG is considered the first modern sports marketing company. Endeavor itself began in 1995 when four former ICM talent agents formed the Endeavor Talent Agency. Endeavor and the William Morris Agency merged in 2009.

The combined company William Morris Endeavor (WME) acquired IMG in 2014. Endeavor bought the Miss Universe Organization in 2015, and the UFC in 2015. In recent years, Endeavor has moved into new areas such as podcasting, streaming video, education, and sports betting.

Are Celebrities a Good Investment?

Hence an investment in Endeavor is an investment in celebrities, entertainment, and celebrity culture. Since celebrity culture seems to be growing to an incredible size many people will wonder if Endeavor (EDR) is a growth investment.

Not according to Stockrow. Stockrow estimates that Endeavor’s revenues shrank by -12.58% in the quarter ending on 31 March 2021. In contrast, Endeavor’s revenues shrank by -7.51% in the quarter ending on 31 December 2020 and grew by 17.82% in the quarter ending on 31 March 2020.

Conversely, Endeavor’s quarterly gross profit grew from $422 million on 31 December 2020 to $456 million on 31 March 2021. Additionally, Endeavor’s quarterly revenues rose from $961 million on 31 December 2020 to $1.07 billion on 31 March 2021.

How Much Cash Does Endeavor generate?

Moreover, Endeavor reported a negative quarterly operating cash flow of -$70.83 million on 31 March 2021. In contrast, Endeavor reported a quarterly operating cash flow of $92.52 million on 31 March 2020.

No other operating cash flow or ending cash flow numbers are available because Endeavor first went public on 29 April 2021. However, Endeavor does pay off some debt, it reported a quarterly financing cash flow of -$77.84 million on 31 March 2021. That contrasts with a $313.88 million quarterly ending cash flow reported on 31 March 2020.

However, Endeavor’s total debt grew from $5.501 billion on 31 March 2020 to $6.313 billion on 31 March 2021. Thus, Endeavor pays some debts.

Yet Endeavor can accumulate some cash. Endeavor had $1.048 billion in cash and short-term investments on 31 March 2021. The cash and short-term investments shrank from $1.190 billion on 31 December 2020 and grew from $886 million on 31 March 2020.

What Value Does Endeavor have?

The Endeavor Group (EDR) is adding some value. The total assets grew from $9.292 billion on 31 March 2020 to $9.608 billion on 31 March 2021. Additionally, the Total assets fell from $9.634 billion on 31 December 2020.

So yes, the Endeavor Group has a little value. Therefore I think Mr. Market priced EDR fairly at $26.15 on 24 June 2021. Since it went public Endeavor’s share price grew from $25.20 on 29 April 2021. Endeavor reached a high of $31.61 on 7 May 2021.

I consider the Endeavor Group an interesting stock that could experience considerable growth in the years ahead. However, I think Endeavor could disappoint dividend investors. Endeavor currently pays no dividend.

If you are looking for a cheap entertainment stock or an investment in mixed martial arts, Endeavor is worth a look. I think this stock will grow but it will not pay a dividend or offer a comfortable margin of safety anytime soon.