You know Walt Disney (NYSE:DIS) and Time Warner (NYSE:TWX) as two of the largest and most powerful media conglomerates in American and global culture today. Together, their movie studios produced 50 of the 100 biggest box office hits of all time. Each company even nurses its own gallery of superheroes, as Disney owns the Marvel brand, and Time Warner is the home of DC Entertainment.

So, the media giants have a lot in common, but which one is the better investment today? As it turns out, a handful of obvious differences come together to make this a fairly easy choice.

Two businessmen arm wrestling.

Image source: Getty Images.

Buyers and sellers

Both companies are knee-deep in enormous merger actions. Time Warner has an $85 billion buyout bid from telecom titan AT&T (NYSE:T) on the table. Disney wants to buy most of 21st Century Fox (NASDAQ:FOX) (NASDAQ:FOXA) for $52 billion, sparking a bidding war with cable giant Comcast (NASDAQ:CMCSA).

Both of these proposed deals are huge game-changers. The AT&T/Time Warner combination would create another combination of media production and content distribution powerhouses, similar to Comcast picking up NBC and Universal Studios a decade ago. Whether Fox ends up in the arms of Disney or Comcast, we're looking at some of Hollywood's most storied names shacking up together.

But both mergers are also facing serious challenges. In Disney's case, the company is squaring off against a series of counter-bids from Comcast -- a worthy challenger that could very well make the House of Mouse walk away empty-handed. Time Warner's telecom-flavored future is endangered by an antitrust lawsuit by the U.S. Department of Justice. As the AT&T/Time Warner deal has been pending since the fall of 2016, AT&T's share prices have fallen far below the protective collar that was supposed to hold the bid steady at $107.50 per Time Warner share, and the deal would stop at $100.55 per share if it were closed today.

You can bet on big mergers changing the picture for both Disney and Time Warner, but you must also consider the possibility that both deals could fail. So, which company would you rather own if the proposed deals were blocked in unison?

Here's the kicker: Disney is just a better business

For me, that question boils down to one simple fact: Disney is the more effective cash machine, by a long shot.

Whether you measure management efficiency by net margins, return on assets, return on equity, or return on invested capital, Disney has Time Warner beat by a comfortable margin at every turn:

Metric (Trailing 12 Months)

Walt Disney

Time Warner

Net margin



Return on assets



Return on equity



Return on invested capital



Free cash flow margin (FCF / revenue)



Data source: Morningstar.

Some of these differences are small and others larger, but they always tilt in Disney's favor. Add in the fact that Disney's top-line revenue stream is 80% richer than Time Warner's, and I walk away with a solid sense that Disney runs a superior business.

With or without mega-mergers, I'd much rather own Walt Disney than Time Warner. In fact, I simply can't think of many stocks I'd hold in higher regard than the House of Mouse. Disney shares are a solid buy right now, trading at just 16 times trailing earnings and 13 times free cash flows.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.