Disney: strong but relatively cheap?

Has anyone else been watching Disney recently? It's looking good to me with along track record of consistent growth. Over the most recent 10 years annual growth has been good and it's moderately priced now. I wouldn't say it's a bargain but not bad. I don't see any big recent blemishes or worsened prospects.

- Price: ~1.7yr low
- P/E: < 17
- 13% EPS growth annualized over 10yrs
- 18% dividend growth annualized over 10yrs

I'm a rank amateur investor so I'm looking for some opinions from people smarter and more experienced than myself.


  • edited September 2016
    I don't know...everybody thinks in a different way...I don't make the math of investing like other people...and I don't think in terms of buying under "intrinsic value"....I think in terms of risk/returns only...and I think DFC models are trash...

    I'm getting ultra conservative and I would like to see a better initial yield...now it stands at 15X forward PE....it is not bad relative to the market and the low interest rate environment....

    I'm getting the rule to not buy over 14X forward PE (if the E is a good proxy for normalized Owner Earnings)...and that only for great growth predictable business....

    ...but I'm more than 2/3 in cash...and that is not fun...and I don't know well its business model and economics...if price goes down I will study it...

    anyone with insights on their business?

  • Strong company. But, I'd argue it's over valued at the moment. I'd definitely consider buying it, just not at $92/share. I'd be a buyer at $85/share and that's still a bit above intrinsic value.
  • That being said. If you're solely looking a dividend stock than I'd say go for it. If so, take a look at Ford as well.
  • Watching it again...with different lents....it got my attention....any good article about its business? .....searching...
  • I bought a couple shares a little while ago. It is a bit overpriced in regards to book value and sales but earnings and cash flow are good relative to what else is out there. It has a very wide moat but seems to be going through some growing pains as it becomes more of an online presence. I believe they have a new CEO coming in and are looking to shift directions. ESPN has been a big drag on revenue but disney is a very diverse company with merchandise, licensing, theme parks, film, pixar etc. I probably would not have bought it but my brokerage was offering one free trade rebate so I impulsively bought it. This is one of the companies that I did the least research on however I feel comfortable owning this into perpetuity. Plus it offers some diversification through its global marketplace. If possible i like to support companies that are socially or environmentally responsible. Disney seems to support all orientations from one article I found but otherwise did not see much in that regards. In a sick and twisted way when some news came out about children getting attacked by gators in the Florida theme park the stock price went up in the same day. It's a strange world.

    Let me know if you guys decide to dip your toe in. I would be interested to hear, you will probably have gotten a better price than I.

  • Disney is a great company. They just opened a theme park in china and are looking to buy netflix. Entertainment has been going through a lot of disruption with the rise of online content. Cord cutters have been cutting into their market share as people move away from cable to online content. It looks like Disney is looking to make things happen as opposed to reacting to the changes. I would expect netflix to switch to a commercial sponsored version with Disney, ABC, and ESPN content added to their lineup. It could be an end run around merger regulations that prohibit them from purchasing a cable company and it will provide a proficient web development staff that they have been needing for a while.
  • I just got into a large position w DIS. I plan to keep it "forever" and think long-term. In the past 1.5 yrs DIS stock price has varied from high of $121 to low of $88. That's a 27% decline from peak to trough. I have to admit, that kind of ride will make investors more sick & nauseous than Disney's wildest theme-park rides. Volatility can be a value investor's friend, though, creating good value-entry points, assuming a company has a moat & strong fundamentals for the long-term. But you must think long-term. I have lost a big chunk of money recently with another stock because I could not stomach the volatility & doubted it's moat & management (I should not ever have bought that stock). Stock investing is just as much an art & investor experience as it is science. That being said: Using Preston's DCF calculator, using a discount rate of 11%, and FCF growth rate of 19% (from the past 5yrs), terminal growth rate of 4%, I find it's current price of $105 is a 44% discount to intrinsic value. If I use the DCF calculator on GuruFocus, using EPS growth rate of 13% (from past 5yrs) for next 10yrs, 4% terminal growth (for next 99yrs - into perpetuity), and discount rate of 11%, I find it's current price of $105 is a 50% discount to intrinsic value. There are others who may agree or disagree with my assumptions & inputs.
  • In 2017, there are plenty of catalysts for the company’s Studio Entertainment segment. For instance, Beauty and the Beast, Guardians of the Galaxy Vol. 2, and Pirates of the Caribbean: Deal Men Tell No Tales are almost guaranteed to become box office hits.

    No doubt, Disney stock missed out on the stock market rally in 2016. But with the ability to dominate global box office and a Media Networks segment that’s not as bad as people think, Disney stock could see some serious upside in 2017.

  • I didn't buy at the time but wish I had. It's up 15% in couple months time. Lesson learned.

    One of the reasons I liked it is it's very strong company that was out of favor through 2016.
  • I bought it at just below 95 and it's up 12.5% in 6 months or so. I don't think anything fundamentally has changed since I bought it.
  • I took another look at their numbers and I think I'll still get in with a series of purchases.
  • edited January 2017
    Adding some more notes of interest to anyone who is following along:

    - Top line revenue growth is very steady (one of Preston's favorite indicators).
    - Return on Equity has been steadily growing since 2009.
    - Return on Equity has grown from 14.4 to 21.4 in recent years.
    - It's still a consumer monopoly and continues to accumulate entertainment franchises (and merch, and destinations)
    - Doing well even in a relatively weak economy (real unemployment, etc)

    - Debt/Equity is just under 50% and has been creeping up in recent years
    - P/E: ~19. It's higher than I'd like but in this environment seems like a reasonable
    - The returns have been high and growing, and seem unlikely to continue at same rate.
  • I looked into Visa and it has a similar profile with some key exceptions:
    - Higher P/E (40) [double DIS]
    - Better Debt/Equity ratio of ~25%
    - 20%+ return on equity for 3 years
  • Draffauf. Just now following this thread. Did you end up with Disney or still researching? I'm knew to the Value Investing approach so your analysis above is most appreciated. Thanks!
  • I view Disney as a great long term company, though the valuation is fairly high right now. If the price drops to~ $90 again (as it did it Aug 2015), it could be a good entry point or time to increase a position.
  • I did but I got out when the price rose. At the moment it's almost sideways from 3 years ago. I'd like to look at the fundamentals. I'd think they'd be doing better with all the superhero and Star Wars movies and a recovering economy in which people are more comfortable spending money on entertainment in general.

    V(isa) has been the steadier of the two picks. It just keeps growing at a steady pace. But I haven't evaluated the fundamentals recently.

    It's not a value pick but I think Tencent still has a lot of room for growth in payments in Asia so I picked some up while it's been knocked down on a bad quarter. I'm expecting to be a rollercoaster and more of a growth bet/gamble that I'll want to watch closely.
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