TKO Group Holdings, Inc. (TKO)

Conclusion

TKO Group Holdings, Inc. runs the UFC and WWE sports entertainment properties and the IMG agency business, earning revenue from media rights, live events, sponsorship and licensing. The shares closed at 199.65 USD on 2026-11-09, giving a market capitalisation of 14.46 billion USD.

The verdict is undervalued. The fair value band runs from 493.60 to 740.39 USD with a midpoint of 616.99 USD, a margin of safety of 209.0% at the current price. Against their own ten-year medians, EV/EBITDA stands at 10.90 against 15.42 and price to free cash flow at 8.39 against 37.87, while the P/E of 50.35 sits above its median of 41.79. The DCF gives 913.88 USD per share at a discount rate of 8.9%, and the fair value from historical multiples is 320.11 USD. The reverse DCF implies growth of -5.0% a year, while revenue grew 37.2% a year over five years and free cash flow per share 8.6%.

What holds the case up is ROIC of 13.9% against a WACC of 7.8%, an operating margin of 22.3% against a median of 20.9%, and revenue growth in all 10 comparable years. What could break it is an Altman Z-score of 1.63, in the distress zone, net debt at 2.51x EBITDA, and earnings per share down 40.0% a year over three years, with five misses among the last eight quarters.

Financial health

Financial strength is yellow: the current ratio of 1.35 supports it, while the Altman Z-score of 1.63 and net debt of 2.51x EBITDA pull it down. The quick ratio is 0.75, debt to equity 1.47 and interest coverage 4.64x. The Altman model was designed for manufacturers, and TKO is not one, so its distress reading should be weighed with that in mind. Insolvency risk: low, about 0.15% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31. The leverage figures are the ones to monitor, because they show how much debt the company carries against its operating earnings.

Earnings quality

Earnings quality is red, held back by a likely-manipulation reading from the Beneish model, rising share count and frequent earnings misses. Cash conversion is a relative strength: free cash flow equals 6.0 times earnings on a trailing basis and 3.7 times over five years, and the accrual ratio is -7.7%. Stock-based compensation is 2.8% of revenue, leaving 1.57 billion USD of free cash flow after it. The share count has grown at a compound 18.5% a year over five years, so buybacks have not offset issuance. The Piotroski score is 5 of 9, and the Beneish M-score of -1.78 falls in the likely-manipulation range. Earnings beat expectations in 3 of the last 8 quarters, with an average surprise of -6.7%. Current-year estimates fell 18.3% over 90 days, while next year's rose 24.5%.

Profitability

Profitability is green, led by ROIC of 13.9% against a WACC of 7.8%, a ROIC minus WACC value of 6.05%, and an operating margin of 22.3% against its ten-year median of 20.9%. Gross margin is 57.5% against a median of 40.0%, and operating margin stability reads 54.5%. Net margin is 5.2%, below its median of 6.3%, so the gap between operating and net profit deserves attention. ROIC has a five-year median of 7.0%, so current returns are above their recent norm. Return on equity is 8.5%, but the DuPont split shows leverage is doing much of the work: net margin of 4.1%, asset turnover of 0.31x and an equity multiplier of 4.15x, all as of 2025-12-31.

Growth

Growth is yellow. Revenue has compounded at 60.7% a year over three years, 37.2% over five and 21.8% over ten, and it grew in all 10 comparable years. Earnings per share has moved the other way over shorter periods: down 40.0% a year over three years and 8.7% over five, though up 12.3% over ten. Free cash flow per share grew only 0.5% a year over three years, 8.6% over five and 31.5% over ten. The next-year EPS growth estimate of 33.4% is a positive signal, but it has yet to show up in reported earnings. The gap between strong revenue growth and weak per-share earnings is the key question for the next few years.

Valuation

Valuation is green, and the verdict is undervalued. The P/E of 50.35 sits 20.5% above its ten-year median of 41.79, while EV/EBITDA of 10.90 is a 29.3% discount to 15.42, price to free cash flow of 8.39 a 77.8% discount to 37.87, price to sales of 2.61 a 37.6% discount to 4.18, and price to book of 4.30 a 56.5% discount to 9.88. The DCF gives 913.88 USD per share at a discount rate of 8.9%, with 20% growth in the first stage and 2.5% terminal growth; 63.2% of that value sits in the terminal value. The fair value from historical multiples is 320.11 USD. The reverse DCF implies growth of -5.0%, against revenue growth of 37.2% and free cash flow per share growth of 8.6% over five years. The dividend yield is 3.05%, with a payout of 25.6% of free cash flow. The fair value band is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target.

Risks

The weakest numbers would hurt in different ways. An Altman Z-score of 1.63 and net debt of 2.51x EBITDA leave less room for error if earnings weaken, and interest coverage of 4.64x would narrow further if operating profit fell. The Beneish reading and the five misses in eight quarters suggest reported earnings may be less reliable than the cash flow figures. The dilution of 18.5% a year means each unit of free cash flow is shared among more shares. No values were reported as unavailable. This analysis has limits: it has no debt maturity schedule, so refinancing timing cannot be assessed, and no revenue split by segment, so the contribution of UFC, WWE and IMG cannot be separated.