Three $100 stocks – Part 3 – DIS

Earlier this month, I posted Part 1 and Part 2 of Three $100 stocks in which I looked at PEP and JNJ numbers a little closely. Today I want to look at Disney (DIS). Like I mentioned earlier, I hold positions in all three stocks and hence have been following them quite closely. Each stock is in a different sector and different growth phase and also moving in different directions lately. I initiated positions in these companies in the recent past (within the last 6 months) and have been adding to these positions as part of my weekly purchases as and when price made sense.

Again, this is just my quick and dirty process to look at the numbers like Revenue, Income and EPS history and growth and looking at the P/Es and is no means a through analysis of all the data points and charts and numbers.

Walt Disney (DIS) is a global company that is one of the biggest in the entertainment industry. The company operates in various segments including Media, Parks and Resorts and Studio Entertainment. The company has been purchasing several brands over the past few years including the likes of Star Wars, Pixar etc. The company also owns brands like Avengers which has been really popular and looks to be a great cash cow for the company. The company also owns ESPN family of networks who don’t seem to be slowing down.

The stock was in low 80s in March 2014 and the stock in currently priced around $106+ which is closer to its 52-week high of $107+. The stock jumped about 15% in the last month with the recent quarterly results being one of the primary drivers. The stock is trading at an all time high.

  • The revenue increased from 31,944 Mil in 2005 to 48,813 Mil in 2014. This represents a CAGR of 4.82%
  • The net income increased from 2,533 Mil in 2005 to 7,501 Mil in 2014. This represents a CAGR of 12.81% which is outstanding.
  • The EPS increased from 1.25 in 2005 to 4.31 in 2014 that represents a CAGR of 14.73% which is even more impressive. Also, the reduction in outstanding shares from 2,028 Mil in 2005 to 1,740 Mil in 2014 also helped boost the EPS.
  • The company pays an annual dividend of $1.15 with a dividend yield is 1.08%. Unlike other dividend stocks that has been bid up by the market for their yields, this stock has been bid up primarily due to its future growth prospect.
  • The stock is currently trading at a P/E of 23.6 compared to its 5 year average of 18.0.
  • Let’s assume the EPS growth to be a 10% for 2015 which is slightly lower than its 10 year average. This will result in 2015 EPS to be 4.741. Applying the average P/E of 18.0 will result a price of $85.33. Applying the current P/E of 23 will result in a price of $109.04.
  • The stock is definitely looks to be positioned for great growth in the future with growth coming in from several sectors and brands. The stock is priced higher right now. I hold a small position in the stock (which I had purchased around high 80s and low 90s). I definitely plan to hold the stock and would like to add more to the stock if the price dropped less than $95.00
  • Morningstar currently has a 2 star rating on the stock with a fair value of $95.00.

What do you think about Disney’s current price and valuation?

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10 thoughts on “Three $100 stocks – Part 3 – DIS

  1. I must admit, I am cheap. If it’s over 20 PE, I usually won’t buy it, especially not for such a low yield too. There are plenty of stocks with a PE of around 20 which are paying more like 3% or more, so for me, DIS is not worth it at the moment.

    The other thing to consider for me, is that I’m a British citizen, and the $ is really high against the £ right now, which is putting me off even further from investing in US based stocks. This is really sad, because there are plenty of crackers like JNJ which I’d love to buy, but am sadly just priced out of the market at present.

    • M,
      I get you. DIS is not yet a great dividend stock because of its low yield and also the fact that they pay annual dividend instead of quarterly dividend. But the dividend growth has been wonderful the last few years and I am sure that with the growth projected ahead, the dividend will be increased considerably.
      And like you mentioned, it is expensive for you to invest in US stocks with the dollar being so expensive right now.
      Regards,
      DGJ

    • Funny enough, I bought DIS while it was at its 52 weeks high (with a relatively high PE ratio as well). 18 months later, I’m showing +100% return (without dividend). This stock is a dividend powerhouse. Even thought the yield is low, the payout will continue to increase significantly in the upcoming years.

  2. I’m a big Disney fan! I hold this stock, I selected it for many of my Dividend Stocks Rock portfolios as well. As you clearly mentioned, yield is low but the growth potential is incredible! This stock is there to stay and I’m sure we’ll collect nice paychecks from it! 😉 Great buy!

    Cheers!

    Mike

  3. I’m a big fan of Disney and can see the price of the stock continue to soar, especially considering that they have a number of great movies soon to come out. However the high P/E ratio is a little bit of a concern.

    • Thanks Tawcan. DIS definitely has a great pipeline of movies for the next 3 years (until 2017). I was just reading about how they have started spreading out Star Wars franchise as well by doing a spin-off movie called “Rogue One” next year. Also, the Marvel’s comics should provide huge opportunities for long time to come. I am excited about the future growth. I only wish I had more shares…. I plan to add more to DIS slowly over the next few months.

      Cheers,
      DGJ

    • Like you mentioned, they have great movies lined up all the way until 2017. Other than movies, their theme parks are doing great and they are increasing prices each and every year and the number of people showing up continues to increase as well. Also, ESPN is a great cash cow that is going to bring huge revenue with great sports programming lined up.
      I am just hoping that the stock drops to $100 levels so that I can add more. I will wait a while to see if that happens, but would add even otherwise.

      Thanks for stopping by.

      DGJ

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