Dueling Fools: Marvel Bear Rebuttal

Ironically, my adversary has used a classic comic book theme to make the investing case for Marvel (NYSE: MVL  ) . He's pulled you into an alternate universe. Let's review the two prevailing myths.

Myth No. 1: Marvel is a blockbuster machine
Sure, I understand that it's tempting to invoke the stunning performance of Spider-Man in likening Marvel to hit machine Pixar (Nasdaq: PIXR  ) . But it isn't accurate. Check out the numbers from movie tracker Box Office Mojo:

Pixar

Title

Total*

Toy Story

$361.9

Toy Story 2

$485.0

A Bug's Life

$363.4

Monsters Inc.

$525.4

Finding Nemo

$864.6

The Incredibles

$631.4

TOTAL

$3,231.7

* Numbers in millions

Marvel

Title

Total*

X-Men

$295.9

Spider-Man

$821.7

X2: X-Men United

$406.4

Spider-Man 2

$783.9

Hulk

$245.3

Daredevil

$179.2

Elektra

$56.6

Blade

$131.2

Blade 2

$155.0

Blade: Trinity

$129.2

Fantastic Four

$285.1

TOTAL

$3,489.5

* Numbers in millions

Got that? Marvel has made 11 comic book adaptations in recent memory, two of which have brought in more than $1.5 billion. Yet because of stinkers like Elektra, it has barely out-earned Pixar, which has made fivefewer films. Is it really any wonder that Pixar's stock trades for a premium and Marvel's is stuck in the mud?

Myth No. 2: Marvel is a cheap stock
My opponent insists that Marvel trades at a discount. My analysis using the discounted cash flow calculator available to Motley Fool Inside Value subscribers (get a risk-free trial here) says otherwise. Follow along, please.

According to Marvel's filings with the Securities and Exchange Commission, owner earnings for the trailing 12 months came in at $112.2 million. (Bear in mind that this total includes $7.1 million in expensed stock-based compensation.) Now factor in 97.1 million shares outstanding, a discount rate of 15% -- the minimum for a company whose earnings are so remarkably volatile -- and assumed earnings growth of 15% for the next five years, 7% for years six through 10, and 3% thereafter, and you arrive at an intrinsic value of ... $17 per share.

Marvel was trading at $18.90 per stub as I was finishing this. That may be cheap in some alternate realities, but not on this particular Earth.

You're not done, True Believer! This is just one pulse-pounding part of a fantastically Foolish four-part Duel! Don't miss Titanic Tim's bearish beginning, Dazzlin' W.D. Crotty's bullish riposte, and W.D.'s final word. When you're done, you're still not done. You canvoteand let us know who you think won this Duel.

Marvel and Pixar areMotley Fool Stock Advisorpicks. For more superheroic stocks from the mighty minds of Tom and David Gardner, subscribe today for a30-day free trial.

Fool contributorTim Beyershas more comic books than regular books -- for now, at least. He didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in Tim's portfolio by checking his Fool profile, which ishere. The Motley Fool has an ironcladdisclosure policy.


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