MSGS - Madison Square Garden Sports: Highly Susceptible To Multiple Contraction

2024-05-30 10:14:35 ET

Summary

• Madison Square Garden Sports has inefficient capital turnover and low operating margins, resulting in little to no earnings relative to capital invested in the business.
• The company is not well-positioned to benefit from the high growth projected in the movies and entertainment market, in my view.
• The company's valuation is exorbitant, with high multiples of earnings and net assets, making it difficult to justify its current stock price.

Investment Summary

We are currently exploring the more obscure pockets of the market in search of selective opportunities for the next 3-5 years. The movies and entertainment industry is one such domain.

Madison Square Garden Sports Corp. ( MSGS ) is a personal favourite (note I didn’t say personal “investment” favourite), hosting numerous high-value tickets at its famous Madison Square Garden. I have long been enamoured by the many sports and entertainment events run at this oracle every year. But this is a classic case of where emotions and investment should not mix. For all its wonders on the entertainment side, my excitement is dampened when examining MSGS’s fundamental economics....

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