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Disney (NYSE:DIS) is one of the most recognizable brands in the world. Whether you are a child or adult, you continue to use Disney's services every day. Let's first go over the brands that Disney offers.

Brands

  • ABC
  • ESPN
  • Pixar
  • Marvel Entertainment
  • Disney World Theme Park and Resort
  • Disney Cruise Lines
  • Touchstone Pictures
  • ...and don't forget franchises like Toy Story, X-Men, Spider-Man, Cars, Amazing Race,etc.

So you can clearly see that Disney has a strong foothold in its branding and the nice part about this is that it creates a large moat. Disney has very little competition in general due to its branding power. Disney pretty much has a monopoly by having the most popular sports network, ESPN. Not to mention that Disney is much more diversified than its competitors. Let's take a look at their main competition.

Competitors

  • Time Warner (NYSE:TWX)
  • CBS Corporation (NYSE:CBS)
  • Viacom (VIA.B)
  • Discovery Communications (NASDAQ:DISCA)

Time Warner Divisions

  • HBO
  • TBS
  • TNT
  • CNN
  • Warner Bros.

CBS Corporation Divisions

  • CBS Television
  • CBS Sports
  • Showtime
  • The CW

Viacom Divisions

  • Nickelodeon
  • Comedy Central
  • MTV
  • BET
  • VH1
  • Spike TV

Discovery Communications

  • Discovery Channel
  • TLC
  • Animal Planet
  • Science Planet
  • Military Channel

The reason that Disney is so great is that most of its competitors are appealing to many different audiences. For example, Time Warner's networks such as HBO cannot even be put in the same category as Disney. Time Warner, CBS, and Viacom all appeal to a higher age group than Disney. However, Viacom's Nickelodeon network would be a similar competitor to Disney. Discovery Communications is a very niche network and appeals to certain viewers. Although it does appeal to younger audiences, it does not have the fan base that Disney holds.

Diversification

Compared to its competitors, Disney is a much more diversified entertainment company. Beside its TV network, it also holds the largest cluster of amusement parks in the world. They also have their own cruise lines as well as its own film studios.

Disney's diversification makes it an attractive investment, but we also need to compare its metrics to its competitors.

Valuation - Forward P/E

  • Disney - 10.9
  • Time Warner - 10.8
  • Discovery - 14.6
  • CBS - 11
  • Viacom - 9

Price/Book

  • Disney - 1.7
  • Time Warner - 1.1
  • Discovery - 1.7
  • CBS - 1.7
  • Viacom - 2.7

Disney's valuation is closer to the lower end, however, Viacom is much cheaper. Something to note is though that Viacom has had to revise its growth estimates down as they were initially too optimistic. On the other hand, Disney gave a much more conservative guidance, while continuing to beat estimates. Disney has seen higher advertising revenue and has seen travel increasing to its theme parks. Time Warner also reported a loss of a 128,000 subscribers for the quarter.

Disney's valuation is not the best in the industry. However, it's important to note that the market does not see Disney taking a hit anytime soon. The market has already discounted Viacom and Time Warner based on weaker guidance. Disney is a great Dow component with a stable 1.6% dividend yield. Not only is the company well diversified, but it has one of the strongest moats in the world. Disney should be a part of any portfolio.

Source: Disney: One Moat To Rule Them All