Wall Street got a surprise announcement to kick off the week when Walt Disney (DIS -2.68%) told the world on Sunday night that Bob Iger was returning to the CEO role, effective immediately. Making this announcement more surprising was that former CEO Bob Chapek signed a new contract with the entertainment giant in June.

Management is certainly an important part of any investing thesis, but does replacing a CEO make a stock a buy? A look at the track records of the two Disney leaders mentioned above may provide some insights into what led to this decision and whether this C-suite change portends different results in the future for the company and the stock.

Leading through a difficult time

Bob Chapek took over as CEO in February 2020 after leading Disney's parks, experiences, and products division. Chapek faced an immediate challenge due to the COVID-19 pandemic, which shuttered Disney's parks and cruise lines for many months. 

While the pandemic was nothing Chapek could have prevented, there were some other controversies during his tenure that left shareholders scratching their heads and/or displeased.

In 2021, actress Scarlett Johansson sued Disney over how the release of the Marvel movie Black Widow was handled. The two parties settled a few months later, but not before some public questioning of Disney's handling of the dispute.

Then in early 2022, Disney got caught up in Florida politics around proposed legislation related to gay rights. While Disney did eventually come out against what became commonly known as the "Don't Say Gay" law, that was after Chapek received criticism for not publicly opposing the new law while it was still only a bill and being discussed in the legislature.

Disney's stock struggled under Chapek

The bottom line with any management team is that shareholders expect the stock to perform, and unfortunately for Chapek, the results on that front did not help his case.

Disney stock has badly trailed the market since Chapek took the reins as CEO. As of the time of this writing, its share price is almost near its pandemic low. The recently reported fiscal 2022 fourth quarter numbers reflect the company's struggles.

DIS Total Return Level Chart

DIS Total Return Level data by YCharts

In fiscal Q4, which ended Oct. 1, revenue for Disney was up 9% year over year, a significantly slower growth rate than it achieved in the previous several quarters and the worst the company has seen since the pandemic began. The struggles also hit the bottom line, as earnings per share were flat year over year.

More concerning to investors was the performance of the media and entertainment segment, where revenue was down 3% and operating income was down 91% compared to the year-ago quarter. On the positive side, the parks business did well, with revenue and operating income growing by 36% and 137% year over year, respectively.

Management did comment during the earnings call that Disney had reached peak operating losses in its direct-to-consumer business. Regardless, considering Disney's focus on this aspect of its business, these results are not a positive sign. 

Can Iger right the ship and make Disney stock a buy?

If the market's reaction was any indication, investors think Iger's return is a positive for Disney's business. On the day after the CEO news broke, Disney stock closed up 6%. However, Wall Street's exuberance alone shouldn't be a reason to buy shares.

There's reason to be hopeful that Iger can help improve Disney's business results. After all, Disney stock outpaced the S&P 500 by more than 300% during his 15-year CEO tenure that ended in 2020. It was also Iger who oversaw the acquisitions of Pixar, Marvel, and Lucasfilm, and the launch of the Disney+ streaming service.

However, that move to significantly expand its streaming footprint also meant a big increase in spending on content creation, which resulted in a 91% year-over-year decline in operating income for that segment of the business. Despite management's expectations, that spending won't be easy to rein in as Disney fights for viewer attention in the ever-more-competitive streaming landscape.

So while there's a reason for hope, there are also challenges Disney faces that make a quick turnaround anything but a sure thing. That said, Disney's price-to-sales ratio of 2.2 is near the lowest it has been in the past five years. This will give investors a bit of a margin of safety if they decide to buy shares in the hopes that the stock will enjoy an Iger-led revival.