The Walt Disney Company (NYSE: DIS)
Quality Value Investing Research Report | $DIS Updated Coverage | August 2024
When referencing this research report, premium subscribers can access the Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Charles Schwab & Co. as of the market close on August 5, 2024, and intended for illustration only.
This report was written and scheduled for posting before Disney’s earnings announcement on August 7, 2024. As a long-view, buy-and-hold investor, the timing is coincidental.
In this updated coverage research report, we’ll reexamine the QVI Stock Picks Real-Time Concentrated Portfolio communications services sector holding, The Walt Disney Company ($DIS), to see if it continues to meet Quality Value Investing’s criteria based on our checklist analysis of the business’s current wealth and the share price’s present value.
Walt Disney | Company Current Wealth
Value Proposition
The Walt Disney Company DIS 0.00%↑ is a dividend-paying large-cap stock in the communications services sector’s movies and entertainment industry. It was added to the QVI Real-Time Stock Picks on June 15, 2009, at $20.72 cost basis per share, adjusted for dividends.
The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences. The company was founded in 1923 and is based in Burbank, California, USA.
Economic Moat
Morningstar assigns Disney a wide moat rating weighted toward its timeless characters and franchises. Its ability to create and attract top-tier content supersedes near-term challenges related to an evolving media industry.
QVI’s Value Proposition Elevator Pitch for DIS:
Walt Disney reigns as the original content king in film, television, and themed resort entertainment.
QVI’s value proposition rating for Disney: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the table below, Disney’s trailing five-year annualized revenue growth was upper-single-digit positive but underperformed the S&P 500 topline growth of 18.90%. However, the company’s revenue growth was +2.55%, which aligned with the broader market’s 3.90% for the most recently reported twelve months.
Further down the income statement, Disney had a low-single-digit positive net profit margin from a 35.03% gross margin, underperforming the S&P 500’s 11.00% net from a 40.70% gross.
Returns on Equity and Invested Capital
Disney’s senior management produced a low-single-digit return on equity, or ROE, below QVI’s targeted threshold and the S&P 500 ROE of 18.50%.
Stock buyback programs often elevate ROE. For example, Disney’s board of directors authorized the repurchase of up to $3 billion of its outstanding shares during fiscal 2024. Are they exercising share buybacks at value prices on behalf of shareholders? The valuation section later in this report will address that question.
Disney’s return on invested capital, or ROIC, was low-single-digits, below QVI’s threshold and the broader market’s 22.30% return. In addition, DIS’s ROIC lagged its weighted average cost of capital, or WACC, demonstrating that its senior executives are currently inadequate capital allocators. (Source of WACC: GuruFocus)
QVI’s business fundamentals rating for Disney: Neutral.
Next, we’ll look at the company’s returns on management table, its enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Disclosure: At this writing, I/we had a beneficial long position in DIS common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider, as appropriate, consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
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