Disney (NYSE:DIS) has been on a volatile ride over the past 12 months, but has nonetheless managed to rally around 25% compared to the S&P 500's 3% gain. Looking ahead, the House of Mouse will report its fourth quarter and full year earnings on Nov. 5 after the market close. Let's take a look at the three main things investors should focus on.

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Source: Pixabay.

1. ESPN vs. the cord cutters
Last quarter, Disney reported a slight decline in subscribers and lower ad revenues at ESPN. That news was alarming because Disney's cable business generated nearly half of its operating income in the first three quarters of the year. Some investors had believed that ESPN's live sports broadcasts would protect it from cord cutters and streaming services. Those fears caused Disney shares to take a double-digit post-earnings plunge which also dragged down its major media peers.

However, Time Warner Cable (NYSE:TWC) and Comcast's (NASDAQ:CMCSA) third quarter earnings reports strongly suggest that those fears are overblown. Time Warner only shed 7,000 video cable subscribers last quarter -- its smallest third quarter decline since 2006. Charter Communications (NASDAQ:CHTR), which Time Warner Cable will merge with, added 12,000 video cable subscribers. Comcast lost 48,000 video subscribers in its most recent quarter, compared to a loss of 81,000 a year earlier.

Those results prompted MoffettNathanson analyst Craig Moffett to suggest that "it's time to change the narrative about cord cutting." To confirm that thesis, investors should see if ESPN showed signs of improvement during the quarter.

2. Old and new theme parks
Disney's theme park business accounted for 30% of its revenue and 21% of is operating income during the first nine months of 2015. During that period, sales rose 6% while operating income climbed 16%. The unit's bottom line growth notably outperformed its top line growth thanks to higher guest spending boosted by higher costs.

Disney has a history of successfully raising ticket prices without impacting attendance rates. But in October, the Wall Street Journal reported that Disney could soon introduce demand-based prices for its domestic parks which would decline in the off season and rise in the high season. That approach should even out attendance levels by attracting more visitors during the low season and relieving congestion during the high season. During the conference call, investors should check if Disney has reached an official decision yet, which could impact year-over-year comparisons for the unit next year.

Meanwhile, the economic slowdown in China has raised questions about the future of the Shanghai Disney Resort, which is scheduled to open next year. During an analyst conference in September, COO Tom Staggs dismissed those concerns and claimed that "consumer spending continues to be relatively strong" in China, and that "330 million income-qualified potential guests" will live within three hours of the resort upon completion. Investors should see if Disney provides any more bullish updates regarding Shanghai and its other expansion plans across China.

3. The Star Wars "halo effect"
Disney will inevitably say a lot about Star Wars: The Force Awakens, which is expected to be one of the highest grossing films in history. Disney wants that new trilogy, along with spin-off films focused starring certain characters, to establish a continuous cinematic universe comparable with the Marvel Cinematic Universe. In addition to boosting revenues at the Studio Entertainment unit, which is already supported by tentpoles like Marvel and Pixar, Star Wars will cast a long-term halo effect across its other business segments.

Disney's new Star Wars Land at its California parks, which will commence construction next year, will likely boost its theme park revenues. Its Consumer Products segment will benefit by licensing its toy rights to Hasbro (NASDAQ:HAS), which holds the exclusive merchandising rights through 2020. During last quarter's conference call, Hasbro CEO Brian Goldner stated that the new licensed toys were "off to a strong start," and were on the "top of consumers' buying lists."

Star Wars Land Attractions Concept Art

Star Wars Land. Source: Disney.

Disney could also develop live-action Star Wars TV shows for its broadcast or cable networks, similar to the way it expanded the Marvel Cinematic Universe with shows like Agents of SHIELD and Agent Carter. New video games, like its popular toys-to-life Infinity series, will strengthen its Interactive division.

But don't ignore the valuations...
The market might turn bullish on Disney if it beats estimates, reports signs of improvement in ESPN, and gives an upbeat outlook regarding Star Wars. However, prudent investors shouldn't ignore the House of Mouse's rising valuations. As of this writing, the stock already trades at 24 times earnings, which is higher than the S&P 500's P/E of 22 but comparable to the industry average for diversified entertainment companies. This means that the stock might only inch higher on an earnings beat but plunge on missed expectations.

Leo Sun owns shares of Walt Disney. The Motley Fool owns shares of and recommends Hasbro and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.