The entertainment business has been quite good lately, with many of the businesses reporting excellent quarters. But perhaps one company that stands above all, and has done so quietly, is Walt Disney. From a long-term perspective, Walt Disney is now one of the safest and strongest stock options out there.
The Walt Disney Company (DIS) is actually a behemoth in the entertainment space. It has a heavily diversified business that very few can compete or even compare with. It has a particularly strong presence in American home entertainment and theme park vacations, reported Bidness Etc .
Where was Walt Disney? The company fell, along with many others, during the 2008 financial crises. Its revenues as well as earnings declined sharply. The company that was once predominantly in the Studio-based productions as well as Parks and Resorts, realized that it was imperative to diversify. Walt Disney has employed both the organic as well as inorganic route to expand. By enhancing internal operations and strategically acquiring promising companies, Walt Disney is now one of the most stable companies that can withstand similar unfortunate events that once rocked it to its core.
Walt Disney still makes majority of its money from its core interests; Media Networks (45%) and Parks Resorts (31%). But its revenue from Studio Entertainment (14%) as well as Consumer Products (8%) is quite healthy. However, the company’s Interactive Segment, though youngest, is perhaps the most speedily growing one.
Simply put, though Walt Disney’s segments are still significantly susceptible to a macroeconomic downturn, the company has tried to extensively spread its risks by making long-lasting investments in all categories that are pertaining to the Entertainment main-group.
What should one watch out for in Walt Disney from an investment perspective?
Free Cash Flow: From Financial Year (FY) 2009 till 2012, Walt Disney had free cash flow in the range of $3.5 to 4.5 billion, but in the last year, it jumped to $6.7 billion. This clearly indicates that the company’s investments, done in the recessionary period are now giving returns adding to the company’s coffers. As far as its annual revenue is considered, that has grown steadily like clock-work at 6%.
Disruptive Programing: One of the most consistent companies to churn out quality programming , Walt Disney can easily be considered staple at the box-office. The holiday seasons certainly have the mandatory Disney charm, which predictably works each year. Walt Disney Co. has taken the right decision to pick-up smaller and several film studios over these last couple of years. Few of the most notable feathers in Walt Disney’s cap are Pixar (2005) and Marvel Studios (2009).
Walt Disney’s stocks have appreciated 30% in just the last year. Though this is quite steep, investors are quite confident about the company’s growth pattern and hence it makes Walt Disney a perfect company to invest in because of its strong fundamentals and marginal risks that are quite spread out.
[Image Credit | Fred Prouser / Reuters, Disney]