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Investment Opportunities

Is Disney Stock Undervalued or Overvalued Today?

Disney (NYSE: DIS) is a $177 billion company today. Investors that bought shares one year ago are sitting on a 8.31% total return. That’s below the S&P 500’s return of 19.48%.

Disney stock is underperforming the market. It’s beaten down… so is it a good time to buy? To answer this question we’ve turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

Earnings-per-Share (EPS) Growth: Disney reported a recent EPS growth rate of -10.34%. That’s below the media industry average of 28.02%. That’s not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the media industry is 29.77. And Disney’s ratio comes in at 19.85. It’s trading at a better value than many of its competitors.

Debt-to-Equity: The debt-to-equity ratio for Disney stock is 43.43. That’s below the media industry average of 95.27. The company is less leveraged.

Free Cash Flow per Share Growth: Disney’s FCF has been lower than its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

Profit Margins: The profit margin of DIsney comes in at 16.77% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Disney’s profit margin is above the media average of 2.27%. So that’s a positive indicator for investors.

Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Disney is 20.63%, and that’s above its industry average ROE of 17.07%.

Disney stock passes four of our six key metrics today. That’s why our Investment U Stock Grader rates it as a buy with caution.


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