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In this updated coverage research report, we reexamine The Walt Disney Company — DIS 0.00%↑ — a communications services sector company, to see if it continues to meet QualityValue Investing’s (QVI) Real-Time Stock Picks criteria based on our proprietary checklist analysis of the business’s current wealth and the share price’s present value.
Walt Disney | Current Wealth
Value Proposition
Walt Disney 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 a cost basis of $20.63 per share, adjusted for dividends paid in cash.
The Walt Disney Company is a global entertainment company. It has three segments: Entertainment, Sports, and Experiences. Founded in 1923, the company is headquartered in Burbank, California, USA.
Economic Moat
Morningstar assigns Walt Disney a wide-moat rating based on its intangible assets, ownership of timeless characters and franchises, and ability to continue creating and attracting top-tier content. These factors outweigh the challenges it faces in an evolving media industry.
QVI’s Value Proposition Elevator Pitch for DIS
The Walt Disney Company reigns as the original content king in film, television, and themed resort entertainment.
QVI’s value proposition rating for Walt Disney: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
As the table below shows, Walt Disney’s trailing three-year annualized revenue growth was low-double-digit positive but lagged behind the S&P 500’s topline growth of +17.10%. Moreover, the company’s low-single-digit revenue growth of +2.80% underperformed the broader market’s +20.10% increase for the most recently reported twelve months.
Further down the income statement, Disney had a positive mid-single-digit net profit margin from a 35.80% gross margin. However, it underperformed compared to the S&P 500’s net profit of 21.20% from a gross margin of 54.30%.
Returns on Equity and Invested Capital
Disney’s senior management produced a return on equity, or ROE, below QVI’s targeted threshold, trailing the S&P 500’s ROE of 56.10%.
Stock buyback programs can elevate ROE. In December, Disney’s board approved $3 billion in share repurchases, its first buyback in six years.
Disney’s return on invested capital, or ROIC, lagged QVI’s threshold and the broader market’s 24.10% return. In addition, the company’s ROIC did not exceed its weighted average cost of capital, or WACC, demonstrating that its senior executives are struggling with capital allocation (Source of WACC: GuruFocus).
QVI’s business fundamentals rating for Walt Disney: Bearish.
Click or Pinchout to Expand
Next, we’ll examine the company’s enterprise downside risks, the stock price’s present value, including share price downside risks, and the investment thesis, all exclusive to Quality Value Investing’s premium (paying) subscribers.
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Unless noted, all data presented is sourced from Charles Schwab & Co., Yahoo Finance, and The Walt Disney Company as of the market close on January 7, 2025, and is intended for illustrative purposes only.
Disclosure: As of the writing of this research report, I/we held a long, beneficial 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, meaning they are 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, a licensed discount broker/dealer, a flat-fee registered investment adviser, a certified public accountant, or a specialized attorney before making any investment, income tax, or estate planning decisions.
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