Is Walt Disney Co (DIS) A Good Stock To Own? A Look At Recent Events

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Walt Disney Co (NYSE:DIS) is one of the media firms that consistently delivered earnings that topped the Street expectations. In August, the stock suffered a downward slide after it warned about the cord cutting and the loss of subscribers in its ESPN. The recent results of Comcast Corporation (NASDAQ:CMCSA) should remove any doubts about the strength of the media companies. The concerns appeared to have been overblown after the June quarter results. Now, Disney is well placed to capitalize on the new streaming trends. Also, content is the primary factor for media firms, and the company has enough of it. The future looks favorable for the company and let’s see take a look at the reasons for owning the stock.

Asia Pacific Region’s Exciting Growth Opportunities

The advantage of owning Walt Disney Co (NYSE:DIS) shares are that they are not restricted to media only. It has theme parks and resorts, and the most exciting opportunity for growth will come from the Asian-Pacific region. The company is planning to open its Shanghai Disney Resort in spring season next year. It would feature six themed lands, a park, two hotels, and shopping, as well as, entertainment district. Its two hotels, Toy Story Hotel, and the Shanghai Disneyland Hotel, would have 800 and 420 guest rooms respectively. They have 963 acres of land, which is approximately double the size of Anaheim’s Disneyland Resort.

For Walt Disney Co (NYSE:DIS), the park location, Pudong region, is the biggest advantage because it was a home to the wealthy financial district in China and third biggest airport in China. Also, Shanghai is one of the rapidly growing cities in China on several factors. That included income, tourism, investment, and population. Its per capita disposable income in 2014 exceeded Beijing to claim the top slot in China.

The company is extremely popular in China. Its popularity was widely witnessed in May when the company was compelled to shut down its Shanghai store an hour after its opening due to overcrowding concerns. Such concern would be resolved after the company opens the gate to about 1,000-acre Shanghai Disney Resort. Therefore, the resort should be a successful venture for the company.

Key Financial Metrics

Walt Disney Co (NYSE:DIS)’s return on assets improved to 9.10% in the current year from 6.4% in 2010 and 7.6% in 2013. Similarly, its return on equity grew to 17.6% in 2015 from 11.5% in 2010 and 14.7% in 2013. Additionally, its net income margin advanced to 16.10% from 10.4% in 2010 while EBIT margin increased to 24.3% from 17.7% in the year 2010. The company’s operating margin in parks and resorts were 20.5% compared to 17.4% in 2010 whereas consumer products’ operating margin rose to 10.4% from 8.9% in the same period.

It was quite clear the company’s performances were not only becoming more efficient but also more profitable one. Another testimony to its efficiency was that its top line advanced only 5.1% in the last six-year period, whereas its profit, as well as, cash from operations advanced 7.5% and 8.4% respectively. Walt Disney Co (NYSE:DIS) is consistent with improving its margin and also generating more income for each dollar of revenue.

Concern On Media Segment Can Be Manageable

Significantly, most of the operating income growth came from the company’s Parks and Resorts, as well as, consumer products division. Their combined contributions accounted for 31% of the operating income in the current year than 26% in 2010. That removes the fear that any downtick in ESPN can be managed by other segments. Also, the Asia-Pacific region is the rapidly growing region for the company delivering a CAGR of 11.1% in the last five-year period.

Walt Disney Co (NYSE:DIS)’s investment in growth areas and region would take its stock further upside once it started its operations of Shanghai Park and Resorts in China. Therefore, it is worth owning the stock.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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  • Jim Freebird

    Great Company on the move!!

  • Jim Freebird

    Great Company on the move!

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