Ghostly or ghastly?
How heroic will Motley Fool Stock Advisor pick Marvel Entertainment (NYSE:MVL) be in 2007? Ask Nicholas Cage. He stars in February's Ghost Rider, about a man who's made a deal with the devil but who chooses to use his demonic curse in a battle against evil.

As a comic book, Ghost Rider is a dark tale of love, loss, and the supernatural. If the trailer is to be believed, Sony's (NYSE:SNE) production of the demonic drama will be equally powerful.

It had better be. Marvel projects 2007 per-share earnings of $1.35 to $1.55. It's a good bet much of that will derive from licensing and merchandise sales from Spider-Man 3, which will be released on May 4 and which looks outstanding. Ghost Rider, if successful, would further lower the bar to meeting expectations.

Meanwhile, Marvel has once again teamed with News Corp.'s (NYSE:NWS) Fox to produce Fantastic Four 2. This time, the big screen will bring to life what may be the classic comic-book story. An alien scout for a world-eater comes to Earth. He and the FF do battle with the lives of billions of people at stake. Sound fantastic? That's why Stan Lee and Jack Kirby named the quartet the Fantastic Four, Fool.

An antidote for Venom
They should deliver. But if they don't, or if Ghost Rider turns out to be little more than a hair-on-fire popcorn-fest that would've been better suited to DVD, Marvel could pay a price in lower sales and earnings.

If so, it would be rotten timing. Marvel's 2008 films -- Iron Man and The Incredible Hulk -- are to be financed through a $525 million credit facility that is already piling up interest at an unknown rate (8% seems likely). There's good and bad to this arrangement.

First, the good: The facility is self-contained. Movie revenues would be used to pay down debt. Therefore, a profitable hit would pay for itself while preserving Marvel's relatively clean balance sheet.

Now, the bad: If Iron Man or The Incredible Hulk (or both) flop, then the facility could keep piling up interest as Marvel waits for a billion-dollar blockbuster to come to the rescue. That would be an unprecedented string of bad luck for mighty Marvel. But it's at least worth mentioning, because spending will ramp up during 2007.

Go back to the Q3 press release. Therein, Marvel said that it plans to "commence principal photography" for Iron Man in the first quarter. Filming for the Hulk sequel will begin before the end of the year.

If some investors are nervous about these and other planned films, it's because there's no way to tell whether a fickle public will embrace lesser-known heroes. I may think Iron Man is cool, but he isn't exactly a household name the way Spider-Man is.

Spinning a web of value?
That's why I'm not entirely convinced that Marvel's shares are a bargain. Neither is fellow Motley Fool CAPS player FarnamStFool41, who writes:

"I have been following this company closely for three years now. At $25.68, this stock is way ahead of itself. Three times the growth rate is very rich . . . [A] change in the business model (to a movie production co.) will be a failure. At some point superhero flicks will reach a saturation point."

He's right; Marvel's stock is expensive by classic valuation metrics. A price-to-earnings-to-projected-growth ratio of 3 is almost never good. But numbers rarely tell the whole story.

Marvel today is making better films than it was just a few years ago. Plus, the genre has gained credibility. Robert Downey Jr. as Iron Man's alter ego, Tony Stark, could be brilliant casting.

Meanwhile, newly independent producer Avi Arad now has a direct financial stake in the future success of Marvel flicks. That raises costs slightly but, if the reward is a big box-office payoff, shareholders should embrace the change.

A Fool for the flicks
And it's not like the numbers won't add up if all goes well. To the contrary. My math says that increased operating income contributions from movies could make Marvel's shares worth anywhere from $46 to $82 a share by the dawn of 2011.

2006 may have been a great year for Marvel, but 2007 will feature a demonic stunt cyclist, a wall-crawling web slinger, and a silver surfer (really). And, if all goes well, it'll also bring a whole pile of new cash waiting to fund still more flicks. See you at the box office, Marvel.

Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.

Marvel is one of dozens of winners David and Tom Gardner have picked for Motley Fool Stock Advisor subscribers. They're beating the market by nearly 40% as a result. Get a close-up look at the portfolio with a 30-day free pass.

Fool contributor Tim Beyers, ranked 1,013 out of more than 17,000 investors in Motley Fool CAPS, owned more than 2,000 comics but no stock in any of the companies mentioned in this story at the time of publication. Get the skinny on all of Tim's stock holdings by checking his Fool profile. The Motley Fool's disclosure policy is super-powered.