As Worldwide Invest Better Day approaches, we here at The Motley Fool are profiling dozens of companies that might be worth investing in. Here's a closer look at Walt Disney
History and overview
Known informally as "The Magic Kingdom," Disney traces its roots to before The Great Depression, with cartoonist Walt Disney and his brother Roy. Together, they founded the company in 1923 as a cartoon studio operating in their uncle's garage. Five years later, Disney would release the cartoon Steamboat Willie, starring Mickey Mouse.
Today, Disney is a multimedia powerhouse with global operations that include television networks, a movie studio, theme parks, and the world's largest and most lucrative library of licensed brands. Disney imprints were responsible for $37.5 billion in retail sales last year, magazine License! Global reports, more than triple the output of second-place Iconix Brand Group
The business
And yet for all its diversity, Disney's media properties are what make this company a top dog and target. Competitors include Time Warner
|
Segments |
FY 2011* |
FY 2010* |
FY 2009* |
|---|---|---|---|
| Cable networks | $12,877 | $11,475 | $10,555 |
| Broadcast | $5,837 | $5,687 | $5,654 |
| Studio entertainment | $6,351 | $6,701 | $6,136 |
| Consumer products | $3,049 | $2,678 | $2,425 |
| Interactive | $982 | $761 | $712 |
| Parks and resorts | $11,797 | $10,761 | $10,667 |
Source: S&P Capital IQ. *In millions.
These same divisions also account for most operating profit, though Disney's Hollywood studio is on the rise thanks to its 2009 acquisition of Marvel Entertainment, the force behind the year's biggest film: Marvel's The Avengers, which has thus far grossed more than $1.5 billion at the worldwide box office.
Financially, having a mix of interdependent yet diverse enterprises has proved fruitful:
|
Metrics |
FY 2011 |
FY 2010 |
FY 2009 |
|---|---|---|---|
| Revenue growth | 7.4% | 5.3% | (4.5%) |
| Gross margin | 21% | 19.1% | 18.3% |
| Net margin | 11.8% | 10.4% | 9.1% |
| Cash/debt | $3,185 / $14,283* | $2,722 / $12,704* | $3,417 / $12,927* |
Source: S&P Capital IQ. *Dollar figures in millions.
As a potential investor, you should take away three things from this data:
- Disney isn't just growing; it's growing faster in recent years thanks to smart moves by management to acquire and cultivate good brands such as Marvel.
- More important than revenue growth is profitable growth. Disney is also outperforming in this area; both gross and net margins have improved over the past three fiscal years.
- Disney is taking on more debt, but increased growth appears to justify the added leverage. More important, management has proved itself adept at investing cash and using debt, with returns on equity and capital rising in each of the past three fiscal years.
The Foolish takeaway
Think about how you invest your own resources. Do you buy what you need at a good price? Do you invest the excess in things that matter, whether for the benefit of yourself or your family? Are you careful not to pile up debts you can't pay off? Companies and management teams are subject to these very same tests. Disney's team passes each with flying colors.
Care to learn more? There's plenty of source material freely available on the Web:
- Walt Disney files annual reports with the SEC each year. Here's the latest.
- You can also get the most recent quarterly earnings report.
- Want to get more granular? Box Office Mojo tracks the performance of Buena Vista Pictures.
- The Comics Chronicles tracks and ranks sales of comics published by Marvel and its peers.
- Or for a comprehensive view of the entire business, Disney has a rich Investor Relations website that includes a history of dividend payments to shareholders.
