Disney: Placing an Intrinsic Value on Mickey Mouse

Walt Disney Company (DIS) was founded in 1923 as an animation studio. Today DIS is one of the largest media and entertainment companies in the world with annual revenues over US$35 billion. With the release of High School Musical 3 DIS is continuing to refine its media strategy. DIS is trading just above its 52-week low. How does the current share price look?

Valuecruncher valuation model of DIS with interactive assumptions

Valuecruncher produces a valuation of US$26.45 for DIS. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 10.6% above the current share price of US$23.91.

Assumptions

• Revenue: Reuters aggregates 18 analysts covering DIS and these analysts have a mean estimate of 2009 revenues of US$38.9 billion. For our analysis we have used US$38.5 billion in 2009, US$40.0 billion in 2010 and US$41.0 billion in 2011.
• Profitability: We have used an EBITDA margin of 20.0% flat to 2011. Reuters has DIS‘s EBITDA margin at 24.3% last year and 19.1% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of US$1.75 billion per annum moving forward.
• Discount Rate: 10.0%.
• Terminal Growth Rate: 3.0%.

Our analysis incorporates the cash and debt the DIS balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

View the full DIS chart at Wikinvest

Disclosure: None.