Dow component The Walt Disney Company (DIS – Free Disney Stock Report) has emerged as a media network giant in recent years through its Disney Channel programming, as well as its ESPN and ABC networks. In addition, its iconic household name is synonymous with theme park entertainment and cruise lines. The other legs of its business operations, including Studio Entertainment and Consumer Products, are also valid contributors to Disney’s impressive financials. A quick glance at the Blurb located in the middle of Value Line report reveals Media Networks as the star revenue generator in fiscal 2014, although the company appears to be firing on all cylinders.
Indeed, Disney’s stock price has had a stellar run over the past few years. In fact, shares of DIS have surged more than 500% since early 2009, around the time the Great Recession came to an end. The notable price movement can be viewed in the Graph section of the page.
Solid earnings have, no doubt, played a large role in the blue-chips consistent share-price advance. The Quarterly Earnings box reveals several years of substantial growth in profitability. On an annual basis, DIS reported bottom-line gains of 23%, 8%, and 26%, in 2012, 2013, and 2014, respectively. What’s more, operating margins have improved substantially, thus supporting the advance in net income. For fiscal 2015, our analyst Orly Seidman expects the earnings per share figure to continue to trend higher, to $4.60. That said, the stock’s Timeliness rank, located in the Ranks box in the upper-left hand corner, is only 3 (Average). This means these shares do not stand out for short-term price performance, even when taking into account the currently elevated valuation.
Nevertheless, the rising popularity of comic book movie releases, specifically Iron Man and Captain America, paint a pretty picture for the years to come. To that end, Disney is essentially creating a world of its own through its Marvel Studios arm. The company has been successful at capitalizing on synergies from interconnected characters (Avengers) and storylines, and by spinning off select heroes into their own individual series of films. The company may even introduce additional characters down the road. Moreover, Disney has expanded the comic book universe beyond the big screen into its television networks through ABC’s Agents of S.H.I.E.L.D series. And its Daredevil joint venture with Netflix (NFLX) should also serve it well. All things considered, the aforementioned pipeline of superhero cinema, coupled with its thriving animated films (Frozen) and Lucasfilms unit's plan to release multiple Star Wars films in the coming years, augurs well for sustainable revenue generation.
Looking at the Statistical Array, one can ascertain that the company boasts promising top-line growth prospects out to late decade. Indeed, studio entertainment, in conjunction with parks & resorts and media networks, should largely buoy revenues. From a historical standpoint, DIS has demonstrated noteworthy year-over-year revenue growth, with the exception of the hiccup in 2008-2009 as a result of the financial crisis.
For the most part, Disney is a safe choice for investors looking for some stability. Scanning down to the bottom right portion of the page, investors should note the company’s prominent score for Earnings Predictability (90 out of 100), as well as the highest Financial Strength rating of A++ in the Ratings box. Meanwhile, in the Ranks box, we see that the equity garners a top-notch rank for Safety (1), which helps boost its conservative appeal. Too, the Beta, a measure of volatility is at 1.05; this is roughly in line with the broader market (1.00), thereby indicating generally lower overall volatility.
On balance, Disney has been generous to its shareholders. Namely, the company has been buying back stock at a feverish pace, repurchasing more than $6.5 billion worth last year alone. Disney probably won’t take its foot off the pedal anytime soon, according to Ms. Seidman’s Commentary. Income-seeking accounts may be inclined to skip over this equity, for now, due to its slightly below-average yield, however, the recent dividend hike of 34% is encouraging and further exemplifies the company’s healthy fundamental position.
Disney’s 12-month forward-looking price-to-earnings ratio (21.0x), shown in the Top Label, suggests this Dow member is richly valued based on the latest full-page report at the time of this writing. On top of that, the equity’s prolonged price appreciation seems to have already discounted much of the top- and bottom-line gains we project out to the coming 3 to 5 years. Although the stock has been a standout performer for quite some time, and holds promise out to late decade, we think investors would be best served on the sidelines until a more attractive entry point presents itself.