With a daily gain of 3.32%, a 3-month loss of -10.21%, and an Earnings Per Share (EPS) of 2.25, The Walt Disney Co (DIS, Financial) seems to be significantly undervalued. This article aims to delve into a detailed valuation analysis of the company, offering insights into its financial strength, profitability, and growth. We invite readers to explore this analysis to gain a comprehensive understanding of the company's value.
Introducing The Walt Disney Co
The Walt Disney Co, globally recognized for its iconic characters like Mickey Mouse and Luke Skywalker, owns several theme parks worldwide. It produces live-action and animated films under studios like Pixar, Marvel, and Lucasfilm. It also operates media networks like ESPN and several TV production studios. With a shift towards a more streaming-focused firm, Disney has acquired the remainder of Hulu and launched Disney+ and ESPN+. As of September 2022, Disney had over 235 million subscribers on its streaming platforms, a significant rise from under 64 million in December 2019.
Currently trading at $90.4 per share, The Walt Disney Co has a market cap of $165.20 billion. However, based on the GF Value, an estimation of the stock's fair value, the stock appears to be significantly undervalued.
Understanding the GF Value
The GF Value is an exclusive measure that represents a stock's current intrinsic value. The GF Value Line provides an overview of the stock's fair trading value. It is calculated based on three factors: historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance.
If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. According to this measure, The Walt Disney Co appears to be significantly undervalued, indicating that the long-term return of its stock is likely to be much higher than its business growth.
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Evaluating Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before purchasing shares. The Walt Disney Co's cash-to-debt ratio is 0.21, ranking worse than 78.33% of companies in the Media - Diversified industry. Overall, the company's financial strength is fair, with a rating of 6 out of 10.
Assessing Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. The Walt Disney Co has been profitable 9 out of the past 10 years, with a revenue of $87 billion and Earnings Per Share (EPS) of $2.25 in the past twelve months. Its operating margin is 8.33%, ranking better than 67.58% of companies in the Media - Diversified industry. Overall, its profitability is fair, with a rank of 7 out of 10.
Growth is a crucial factor in a company's valuation. The Walt Disney Co's 3-year average revenue growth rate is better than 58.98% of companies in the Media - Diversified industry. However, its 3-year average EBITDA growth rate is -16.9%, ranking worse than 77.26% of companies in the industry.
ROIC vs WACC Comparison
Another way to evaluate a company's profitability is to compare its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, The Walt Disney Co's ROIC was 2.84, while its WACC came in at 10.19.
Conclusion
Overall, The Walt Disney Co (DIS, Financial) stock appears to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. However, its growth ranks worse than 77.26% of companies in the Media - Diversified industry. To learn more about The Walt Disney Co stock, you can check out its 30-Year Financials here.
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