Projected Yield: ~ 1.05%
Disney owns the rights to some of the most famous characters ever created, including Mickey Mouse and Winnie the Pooh. These characters and others are featured in several theme parks Disney owns or licenses around the world. Disney makes live-action and animated films under several labels and owns ABC, Disney Channel, and ESPN. Disney also owns a 42.5% stake in A&E, The History Channel, and Lifetime Networks. The company generates about 25% of its sales from outside the United States.
I estimated the firm's WACC today at 12.29% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year | FCF $Millions |
2001 | 1253 |
2002 | 1200 |
2003 | 1852 |
2004 | 3217 |
2005 | 2446 |
2006 | 4759 |
2007 | 3855 |
2008 | 3860 |
2009 | 3311 |
2010 | 4468 |
Average Annual Growth FCF: ~ 22%
CAGR FCF: ~ 15%
Consensus Forecast Industry 5-Year Growth: ~ 16% per yearConsensus Forecast Company 5-Year Growth: ~ 15% per year
Assuming the company achieves a 5-year growth rate in FCF of 15% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 4468 |
1 | 5138 |
2 | 5909 |
3 | 6795 |
4 | 7815 |
5 | 8987 |
Terminal Value | 84068 |
The firm's future cash flows, discounted at a WACC of 12.29%, give a present value for the entire firm (Debt + Equity) of $71,091 million. If the firm's fair value of debt is estimated at $13,200 million, then the fair value of the firm's equity could be $57,891 million. $57,891 / 1890 million outstanding shares is ~ $31 per share and a 20% margin of safety is ~ $25/share.
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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