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One day after News Corp. (NASDAQ:NWS) entered into an online advertising deal with Google Inc. (NASDAQ:GOOG) and delivered quarterly results that were in line with expectations (see conference call transcript), our analysis shows the media giant's A-shares still offer an attractive return.

The A-shares of News Corp. are the more commonly traded shares, although they lack the voting rights attached to the B-shares, which are 31 percent owned by the Murdoch family. The A class does, however, sport a 0.62 percent dividend yield. That yield encompassed an 11.3 percent payout of the company's A-allocated per-share earnings in the trailing 12 months.

Given the double-digit growth News Corp. shares are expected to see, though, we're going to price these shares based on per-share earnings growth, and not dividend growth capacity, as the long-term price expectation seems more likely to be based on earnings than dividends. The consensus long-term earnings growth rate for the shares is 16.6 percent, based on seven projections in a range of 22.6 percent to 11.4 percent.

Our capital-asset-pricing model takes several inputs: beta, representing volatility relative to the market; an expected price-to-earnings ratio; and a target for the next full year. Starting with the last datum first, the company's Aug. 8 earnings release was for its fiscal year-end quarter, ended June, so we turn to estimates of News Corp.'s fiscal 2007 results. Seventeen analysts gave Reuters Estimates their opinions in a range of $1.10 a share to $0.83 a share; the mean is $1.03.

News Corp.'s debt-to-equity ratio increased slightly in 2006. To compensate for this, we'll raise our estimate for its future beta, which is sensitive to leverage, to 1.7 from the historical 1.68. Finally, we'll use a recent price-to-earnings ratio of 22.2.

The model indicates that a new investment in News Corp. today would require an annualized per-share earnings growth rate of 11.2 percent over the next five years in order to break even. In other words, the market seems to be pricing News Corp. to expect the worst. Given that our take on the Google deal is that it has resoundingly answered critics of the MySpace acquisition through innovative monetization of Internet traffic, there is room to hope the company will surprise on the upside. The bulls might want to give these shares a look.

At the time of publication, Paul DeMartino did not directly own puts or calls or shares of any company mentioned in this article. He may be an owner, albeit indirectly, as an investor in a mutual fund or an Exchange Traded Fund.

Note: This is independent investment and analysis from the Reuters.com investment channel, and is not connected with Reuters News. The opinions and views expressed herein are those of the author and are not endorsed by Reuters.com.