The Bull Rankings scorecard — our quality-growth score is 53.1 / 100, built from three pillars scored 0–100: Quality 57, Growth 66, Value 39 (valuation is judged against sector peers). At today's price, our reverse-DCF read says the market is implicitly betting on free-cash-flow growth of about 4% a year next year, fading to 3% a year by year ten — a gauge of how much optimism is already in the stock.
The thesis
TKO Group Holdings, Inc. sits at the intersection of live‑event spectacle and digital content, and its current price of $191.08 is already pricing in a ~4 % per year free‑cash‑flow growth (in year one, slowing to 3% a year by year ten), according to our reverse‑DCF. That figure sits slightly below the 5.1 % revenue growth reported for FY 2025‑26, close enough that our model reads the two as roughly in line: the market expects growth near today’s pace. Our quality‑growth score of 53.1/100 is driven by a Growth pillar of 66 and a Quality pillar of 57. The Value pillar lags at 39, indicating that the stock is not yet a bargain even for a growth play. The strongest argument for TKO is the company’s ability to compound through its UFC and WWE segments, which together generate the bulk of revenue and free cash flow. The weak Value score says the stock is not cheap, so the case rests on sustaining current growth.
What the business actually is
TKO’s revenue engine is split into three distinct segments. The UFC unit distributes programming content, sells tickets and site fees for global live events, and licenses UFC‑branded products. The WWE unit mirrors this model with media rights fees, ticket sales, and WWE‑branded licensing. The third arm, IMG, focuses on media rights management. Together, UFC and WWE lead combat sports and sports entertainment, delivering a mix of broadcast, streaming, and merchandising revenue that fuels the company’s cash‑flow generation.
Why it can (or can't) keep compounding
The moat lies in brand dominance and content ownership. UFC and WWE are household names; their intellectual property is protected by long‑term contracts with fighters and athletes, and the brand equity translates into premium ticket pricing and high‑margin licensing deals. The company’s profit margin of 4.3 % and ROE of 6.8 % demonstrate that it can convert revenue into shareholder value, albeit at modest levels compared to pure tech peers. The debt‑to‑equity ratio of 0.59 keeps leverage manageable, allowing room for reinvestment without over‑leveraging. The model’s Diluting shareholders signal shows the share count has grown, largely from stock issued to buy businesses from Endeavor, which pressures earnings per share. Its Cut its dividend signal shows per‑share dividends fell over the past year.
The valuation question
At $191.08, the price implies a P/E of 67 and a PEG of 1.56. The reverse‑DCF indicates that a 4 % free‑cash‑flow growth rate is needed to justify the current market value. This is slightly below the 5.1 % revenue growth, close enough that our model reads the two as roughly in line. If the company can push free‑cash‑flow growth well above revenue growth, there is upside. Conversely, if free‑cash‑flow growth stalls, the price would be overvalued relative to earnings. The Value pillar score of 39 underscores that the stock is not cheap; it trades at a premium to peers on the measures we use.
The bear case
The most compelling skeptic points to the low profit margin of 4.3 %. In an industry where competitors can leverage lower operating costs, a thin margin signals vulnerability to cost shocks or competitive pricing. If UFC or WWE were to face regulatory changes or talent disputes that increase costs, the margin could compress further. A concrete confirmation would be a margin decline below 4 % in the next quarter, which would erode free‑cash‑flow and hurt the implied growth assumption.
What would change our mind
- Margin deterioration: If the profit margin fell below 4 %, the company’s ability to generate free cash flow would be compromised, weakening the growth thesis.
- Debt‑to‑equity spike: An increase above 0.59 would signal higher leverage, raising financial risk and potentially limiting reinvestment capacity.
- Value pillar decline: Should the Value score drop below 30, the stock would become even less attractive for a growth play, suggesting that the market has over‑priced the company’s prospects.
If any of these thresholds are breached, the current thesis would need to be revisited.