Few football clubs are publicly traded. One of the few exceptions is Juventus FC, the Turin team that has just won the Italian league and finished as a finalist in the Champions League. In this article I will do a brief fundamental analysis of Juventus FC to determine if we are looking at a good company that trades at a reasonable price to be part of our investment portfolios.
As a brief summary of the history of the club, I leave you with the
Juventus FC balance sheet
I would like to highlight three negative aspects of the evolution of Juve's balance sheet during the last 5 years:
- The increase in debt (“total liabilities”). Year after year, debt has been increasing steadily, both in the short term (from 106 to 357 million) and in the long term (from 201 to 453 million)
- The decrease in equity (“stockholder's equity”). From 90 to 43 million euros, which means that the company's debts exceed its own funds by more than 10 times.
- The little stability of the balance, with large variations in their accounts, both positive and negative. This says very little in favor of business stability.
The only positive aspect can be found in the increase in current assets (from 72 to 144 million). The item that increased the most within current assets is “other current assets”, which should be analyzed in greater depth.
Analysis of the Juventus Income Statement
Juventus FC income statement
If the balance was bad, the income statement is worse. This year's results are likely to be considerably better due to the club's sporting successes this season. However, past data shows that the club has failed to have positive results in any year. Moreover, if we add the results of the last 6 years, we have accumulated losses that are close to 200 million euros. A terrible fact, especially for a company with its own funds that have not reached 100 million euros in any year.
Analysis of Cash Flows
Juventus FC cash flow statement
The poor results of the income statement even look good when compared to the cash flows. Free cash flow has been negative every year. Very negative. If we add the negative flows of the last 6 years we obtain as a result that Juventus has burned a total of 632 million euros !!
Juve competitive analysis
Juventus FC, like many other football teams, has a very important competitive advantage, the absolute loyalty of its fans. Few companies have such loyal customers that they are capable of tattooing their shield on their skin. If you want to see examples you just have to scenario analysis.
Still, it would be nearly impossible to get a precise intrinsic value as the world of soccer is one of the most volatile. Teams are exposed to a large number of events of an uncertain nature such as the injury of their main figures or a bad streak of results that lasts indefinitely in time.
Is it worth all this effort? I do not think so.
In short, I don't know how much Juventus can be worth on the stock market. Nor do I know if its price will go up or down over the next few years. I have no idea. What I do know is that it is a very difficult business to value whose managers do not focus on maximizing shareholder value, which makes me discard Juventus to be part of my investment portfolio.
The lesson of this article is that, sometimes, when we perform an analysis and valuation of a company we are not going to obtain any figures. A "I don't know what it is worth, nor is it worth the effort to analyze it in depth" can be a more than satisfactory result of a fundamental analysis.