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Dueling Fools: Marvel Bear Rebuttal

Give Rick credit: He's spun a compelling tale. How could he not? Rick's a great writer, and Marvel (NYSE: MVL  ) is a great stock story. And that's exactly what should scare the bejeezus out of you.

Consider the dilution argument. Rick makes it sound so simple:

"The company had 114 million fully diluted shares in 2004 and 106 million in 2005, and now has less than 92 million fully diluted shares into which to divide its net profits."

That's exactly right. But remember that Marvel is borrowing money to buy back shares. The company isn't just being generous; it's using the corporate credit card to return money to you. What? That doesn't make sense to you? Yeah, me neither.

And it's not like Marvel won't be borrowing more soon. That $525 million credit facility Rick mentions is costly. Interest payments could reach as high as 13%, according to Marvel's filings with the SEC, and the bulk will likely be paid at or around the prime rate, which today sits at 8%.

Remember, too, that Marvel must absorb 100% of the production costs for new movies it produces. History shows that, under that model, Marvel must create another $1 billion box-office blockbuster to earn the piles of moola investors are expecting.

Call me crazy, but I don't see Ant-Man delivering such giant-sized returns.

Marvel is a Motley Fool Stock Advisor selection. Ask for us anall-access passand you'll get a backstage look at all of the stocks that are helping David and Tom Gardner beat the S&P 500 by an average of more than 38 percentage points as of this writing. It's free for 30 days. All you have to lose is the prospect of a richer portfolio.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and thenvote for a winner.

Fool contributorTim Beyersowns more than a thousand Marvel comics. But he still won't buy shares in Marvel or any of the other stocks mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.

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