DIS Investment Analysis Report & Stock Research, The Walt Disney Company

Ockham's Rating/Recommendation Summary

Rating specific information requires Premium Access.
Buy Now or Learn More about Ockham's Features and Services.

DIS Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at DIS through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 1.94x and 1.31x respectively.

Utilizing this range we can see that DIS’s current Price to Sales per share ratio of 1.52x is somewhat below its historical weighted average by 7%. Given this level of sales per share, we suggest a neutral share price forecast. To the extent there is a further drop in the Price to Sales ratio from current levels, which would occur through some combination of increased sales per share or a decline in share price, we would only become more positive about the Price to Sales ratio outlook.

DIS Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. DIS is below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from DIS. For example, DIS's Cash Earnings ratio per share has fluctuated between 9.75 and 14.80 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where DIS is with respect to prior business periods.

With a historical average Cash Earnings ratio of 12.27, the current Cash Earnings ratio of 11.15 is a positive opportunity for value in the Ockham view. Naturally, we would love to see a deeper value opportunity for DIS, but to get there one of two things must occur (or both). Either the stock price must decline further to increase the long term buying opportunity, or the management at DIS needs to earn more cash. If either, or both, of these occur, then we could see a significant gap emerge between what investors were willing to pay for in the past, and where DIS is trading currently (latest close price of $29.54).

DIS Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for DIS to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for DIS is $0.35 producing a current dividend yield of 1.18%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from DIS against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from DIS over previous years was 2.31% while the lowest dividend yield was 0.51%. With that range in mind, DIS’s current dividend yield is a full 16.31% below its median dividend yield historically. This is a negative from our perspective.