Investors constantly grapple with the challenge of determining the true value of a stock. For The Walt Disney Co (DIS, Financial), with its recent daily gain of 6.91% and a modest 3-month gain of 3.17%, the question arises: Is the stock significantly undervalued? With an Earnings Per Share (EPS) of $1.23, we delve into a detailed valuation analysis to uncover the potential long-term return prospects for investors.
Company Introduction
The Walt Disney Co (DIS, Financial) is a titan in the entertainment industry, owning some of the most iconic characters and franchises known worldwide. With a history of innovation and expansion, The Walt Disney Co has evolved into a multimedia powerhouse, encompassing theme parks, film studios like Pixar, Marvel, and Lucasfilm, and a significant presence in television with networks such as ESPN. The company has also made a strategic shift towards streaming, with Disney+ and ESPN+ amassing over 235 million subscribers as of September 2022. When comparing the current stock price of $90.34 to the GF Value of $162.59, it becomes clear that a deeper analysis is required to understand the intrinsic value of The Walt Disney Co.
Summarize GF Value
The GF Value is a proprietary metric that reflects the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line suggests the fair value at which the stock should be traded. If the stock price is significantly below this line, as is the case with The Walt Disney Co (DIS, Financial), it indicates that the stock is undervalued and may offer a higher future return compared to its business growth.
Financial Strength
An essential aspect for investors to consider is the financial strength of a company, as it can prevent capital loss. The Walt Disney Co's cash-to-debt ratio of 0.24 ranks lower than many of its peers, indicating some caution is warranted. However, The Walt Disney Co's financial strength is rated 6 out of 10, which points to a fair balance sheet and a reasonable position to manage its debts.
Profitability and Growth
Consistent profitability is a hallmark of a less risky investment. The Walt Disney Co has maintained profitability for 9 out of the past 10 years, with an operating margin of 8.49%, ranking it favorably within the industry. The company's profitability rank is 7 out of 10, which reflects its sound financial performance. However, growth is equally critical, and The Walt Disney Co's average annual revenue growth of 2.7% is somewhat middling, indicating that while the company is stable, its growth is not outpacing many competitors.
ROIC vs WACC
The comparison of Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is a crucial measure of profitability. Ideally, ROIC should exceed WACC to indicate that a company is generating sufficient returns. For The Walt Disney Co, the ROIC is currently 2.89, which is below the WACC of 10.43, suggesting that the company's investments are not yielding returns higher than its capital costs.
Conclusion
Overall, The Walt Disney Co (DIS, Financial) appears to be significantly undervalued. The company's financial condition is stable, and its profitability is reasonable. However, its growth and the ROIC versus WACC comparison indicate areas where improvement is needed. For those interested in a deeper dive into The Walt Disney Co's financials, further information can be found in the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
