Marvel Entertainment
If you find yourself handing out Halloween candy to knee-high versions of Spider-Man, the Incredible Hulk, and X-Men's Storm this weekend, Marvel thanks you. The comic-book company with the coveted action-hero franchises has become a short-seller's villainous nightmare.
It wasn't always this way. While DC Comics milked its Superman and Batman properties, Marvel seemed to do little more than watch. Like any good superhero story, though, Marvel was honing its abilities in secrecy -- with vengeance an ultimate given, along with the company's comeuppance.
These days, Marvel characters own the multiplex and the toy store. These hot assets are in their marketing infancy with planned sequels and spin-offs galore. The company continues to guide its analysts higher only to clear those hurdles with ease.
Earlier this month, the company raised the bar. Again. It is now looking to earn roughly $1.40 a share this year. Want to kick yourself? If you had this kind of vision back in the summer of 2002 when Spider-Man was already the year's top-grossing flick, you could have bought into Marvel for what is shaping up to be just three times this year's profits.
Our own David Gardner had that kind of Spidey sense. The stock has been a five-bagger since he recommended the company in The Motley Fool Stock Advisor last year. Does that mean it's too late?
I don't think so. Over the past year the company has used its hefty cash levels to pay down its once-restrictive debt. The company's lean infrastructure and its active licensing-collecting ways have resulted in jaw-dropping net margins of 41.6% through the first half of the year.
The opportunity here lies in the fact that Wall Street doesn't believe in superheroes. Analysts think that earnings will dip slightly in 2004. I hear they also believe that Peter Parker is just a run-of-the-mill Daily Bugle photographer and that Dr. Banner doesn't have any issues with anger management.
It's true that fluctuations in release schedules and royalty-realization periods will lead to choppy results, but this is also a company that has movie studios stocking the 2004 calendar with layup blockbusters in Spider-Man and Blade sequels as well as celluloid introductions for The Punisher and The Fantastic Four.
Besides, do you know what Marvel was telling its investors back in January? It had originally guided the market to expect earnings to come in between $0.57 and $0.62 a share in fiscal 2003. You already know that Marvel will be earning more than twice as much this year, and that's before accounting for any additional fourth-quarter upside.
So go ahead and dig deep into your candy coffers when Daredevil or Magneto come knocking. It just seems fitting to give back some of the sweetness.
Rick Aristotle Munarriz loves Halloween. His favorite conquests as a kid involved all things chocolate and Lemonheads. Rick owns shares of Marvel. His other stock holdings can be viewed online.
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