Walt Disney Co Valuation – March 2017 $DIS

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Walt Disney Co (DIS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Walt Disney Company is an entertainment company. The Company operates in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media. The media networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, and radio networks and stations. Under the Parks and Resorts segment, the Company’s Walt Disney Imagineering unit designs and develops new theme park concepts and attractions, as well as resort properties. The studio entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. It also develops and publishes games, primarily for mobile platforms, books, magazines and comic books. The Company distributes merchandise directly through retail, online and wholesale businesses. Its cable networks consist of ESPN, the Disney Channels and Freeform.

DIS Chart

DIS data by YCharts


Downloadable PDF version of this valuation:

ModernGraham Valuation of DIS – March 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $176,072,768,251 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 169.85% Pass
6. Moderate PEmg Ratio PEmg < 20 21.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.14 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.86 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.58 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $5.22
MG Growth Estimate 12.43%
MG Value $174.08
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $75.66
MG Value based on 0% Growth $44.35
Market Implied Growth Rate 6.44%
Current Price $111.51
% of Intrinsic Value 64.06%

Walt Disney Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.85 in 2013 to an estimated $5.22 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.44% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Walt Disney Co revealed the company was trading above its Graham Number of $59.11. The company pays a dividend of $1.49 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 21.37, which was below the industry average of 39.27, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.78.

Walt Disney Co receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.78
Graham Number $59.11
PEmg 21.37
Current Ratio 0.86
PB Ratio 4.14
Current Dividend $1.49
Dividend Yield 1.34%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $16,665,000,000
Total Current Liabilities $19,317,000,000
Long-Term Debt $14,792,000,000
Total Assets $91,576,000,000
Intangible Assets $34,685,000,000
Total Liabilities $48,366,000,000
Shares Outstanding (Diluted Average) 1,603,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.75
Sep2016 $5.73
Sep2015 $4.90
Sep2014 $4.26
Sep2013 $3.38
Sep2012 $3.13
Sep2011 $2.52
Sep2010 $2.03
Sep2009 $1.76
Sep2008 $2.28
Sep2007 $2.25
Sep2006 $1.64
Sep2005 $1.19
Sep2004 $1.07
Sep2003 $0.59
Sep2002 $0.61
Sep2001 -$0.02
Sep2000 $0.57
Sep1999 $0.62
Sep1998 $0.89
Sep1997 $0.95

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.22
Sep2016 $4.73
Sep2015 $4.03
Sep2014 $3.42
Sep2013 $2.85
Sep2012 $2.51
Sep2011 $2.19
Sep2010 $2.01
Sep2009 $1.94
Sep2008 $1.92
Sep2007 $1.61
Sep2006 $1.20
Sep2005 $0.88
Sep2004 $0.67
Sep2003 $0.47
Sep2002 $0.45
Sep2001 $0.45

Recommended Reading:

Other ModernGraham posts about the company

Walt Disney Co Valuation – December 2015 Update $DIS
26 Companies in the Spotlight This Week – 11/22/14
The Walt Disney Company Annual Valuation – 2014 $DIS
Throwback Thursday – One Share Challenge
ModernGraham Valuation: The Walt Disney Company (DIS)

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The author held a long position in Walt Disney Co (DIS) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






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