4
The Walt Disney Company (DIS)
- Equity
- US
- Communication Services
RISK
RETURN
Key risk factors
Strong trading liquidity
Low price volatility
Resilient to price shocks
Key return factors
Greatly overvalued vs peers
Poor growth
Modest dividends
Corporate actions & dividendsDividend of USD 0.450 with an ex-date of 05 Jul 2024.
Company profileThe Walt Disney Company, together with its subsidiaries, operates as an entertainment company worldwide. It operates through two segments, Disney Media and Entertainment Distribution; and Disney Parks, Experiences and Products. The company engages in the film and episodic television content production and distribution activities, as well as operates television broadcast networks under the ABC, Disney, ESPN, Freeform, FX, Fox, National Geographic, and Star brands; and studios that produces motion pictures under the Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, Pixar, and Searchlight Pictures banners. It also offers direct-to-consumer streaming services through Disney+, Disney+ Hotstar, ESPN+, Hulu, and Star+; sale/licensing of film and television content to third-party television and subscription video-on-demand services; theatrical, home entertainment, and music distribution services; staging and licensing of live entertainment events; and post-production services by Industrial Light & Magic and Skywalker Sound. In addition, the company operates theme parks and resorts, such as Walt Disney World Resort in Florida; Disneyland Resort in California; Disneyland Paris; Hong Kong Disneyland Resort; and Shanghai Disney Resort; Disney Cruise Line, Disney Vacation Club, National Geographic Expeditions, and Adventures by Disney as well as Aulani, a Disney resort and spa in Hawaii; licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort; and provides consumer products, which include licensing of trade names, characters, visual, literary, and other IP for use on merchandise, published materials, and games. Further, it sells branded merchandise through retail, online, and wholesale businesses; and develops and publishes books, comic books, and magazines. The Walt Disney Company was founded in 1923 and is based in Burbank, California.
Valuation: Greatly overvalued
Multiple
TTM
NTM
P/E
111.50
25.60
PEG
16.40
-
P/B
1.90
1.70
P/S
2.10
2.00
P/FCF
22.50
32.70
EV/EBITDA
13.40
12.20
From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. Specifically, the stock is expensive' on P/E, overvalued on EV/EBITDA, and overpriced on P/FCF.
Performance: Mixed
The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 7ppts over past six months and grown 10ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Neutral
The average target price is 118 and suggests 15% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 145.0. This translates into 41% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 66.0. This is equivalent to 36% downside potential in the worst case.
Profitability: Modest
RoE
The Walt Disney Company reported a return on equity (RoE) of 1.7% in the last 12 months, down from 3.7% in FY22. The market consensus projects an RoE of 4.2% in FY24, again behind its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 0.9% in the last 12 months, a decrease from 1.7% in FY22. The market analysts predict that RoA will be 2.2% in FY24, again weaker than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) declined to 1.0%, below the peers. The consensus estimate for FY24 for RoCE is 9.9%, again behind the peers.
Net margin
EBITDA margin
Historically, DIS has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 1.9%, down from 4.0% in FY22. The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 19.1% in the last 12 months, up from 13.6% in FY22.
RoIC / WACC = 0.3(weak value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.3 in the past several years. This ratio implies a weak shareholder value creation. Growth: Poor
Revenue
EBITDA
EPS
Free cash flow
DIS reported revenue of USD 89 203mn in the last 12 months, up 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 44% from FY23 to USD 0.92. Market expects EPS to reach USD 4.71 in FY24.Revenue growth has been constrained in the past several years (negative-to-neutral), while EBITDA has declined rapidly trend in recent years (strongly negative). Net income has fallen rapidly in recent years (strongly negative). Free cash flow generation has been quite favourable and in contrast to the falling EBITDA. We emphasize the highly volatile dynamics of EBITDA, EPS and FCF.
Dividends: Modest
The company tries to pay dividends regularly but only sometimes does so. It has paid dividends in roughly half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. On average, the company pays dividends annually.
Default risk: Considerable
The risk of default is high. Among the negative credit factors and we point to slow historical revenue growth, and negligible return on capital. We note an favourable capital structure, among the positive credit factors.
Volatility: Low
In normal market circumstances, DIS is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. We would also like to highlight the minimal intraday volatility of the instrument.
Stress-test: Resilient
In highly turbulent market conditions, DIS is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low.
Selling difficulty: Very low
DIS boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.