The most popular entertainment and communication company in the world was founded on October 16, 1923 in Los Angeles, California, United States. The story begins when Walter and Roy Disney started producing cartoons in Hollywood.
In 1922 Walter Disney founded the company Laugh-O-Glam Films Inc, where he made short films like Puss in Boots and Cinderella. After creating his latest short film, Alice´s Wonderland, he moved to the film industry, Hollywood. His first studio in Hollywood was a garage at his uncle Robert's house, he sent the movie Alice's Wonderland to the New York distributor Margaret Winkler, who showed great interest and hired Disney to produce more movies. His brother Roy was in charge of the financial management of the studio and this was the beginning of Disney Brother's Studio, the seed of the future The Walt Disney Company.
In 1940 Disney had the idea to build an amusement park for his family and for his employees. This project grew to become Disneyland, the park opened its doors to the public on July 18, 1955.
Today, the small animation studio founded in 1923 by Walt and Roy Disney has become one of the largest companies in the field of entertainment, with annual revenues of $ 36 billion.
The following financial analysis will show the annual financial situation of the Walt Disney Company as of December 2018, with information collected from reliable financial sites (Investing.com and Reuters.com), this in order to dictate how feasible it is to invest in the company today and what has been its growth compared to December 2017.
Walt Disney Company Balance Sheet
Table 1. Walt Disney Company Balance Sheet, as of December 2018 (in millions of dollars):
The Balance Sheet provides information on the assets, liabilities and capital of the Walt Disney Company. Regarding assets, we can see that goodwill represents its best asset with 32% ($ 31,269) of total assets, second is property, furniture and equipment with 30% ($ 29,540), followed by of intangible assets with 15% ($ 14,700), and in fourth place are their accounts receivable with 10% ($ 9,334) of the total value of the asset.
Regarding the liability-capital ratio, we can see that the liability represents 46% and capital 54%. Within these percentages, we find that the result of previous years represents 86% ($ 82,679), followed by the total of common shares with 38% ($ 36,779), long-term debts with 18% ($ 17,084) and other liabilities with 7% ($ 6,590).
Walt Disney Company Income Statement
Table 2. Walt Disney Company Income Statement, as of December 2018 (in millions of dollars).
The income statement shows that there was an increase in sales of 7.79% compared to December 2017. Cost of sales represents 55% of total sales, so the Walt Disney Company obtained a gross profit of 45% in 2018. Administrative, operating and depreciation / amortization must be deducted from this gross profit to obtain operating profit, which constitutes 25% of sales. Likewise, expenses are subtracted from this figure. from interest income and tax provisions, which derives in net after-tax income that represented 19% of sales. With respect to December 2017, we can see that there was an increase of 21.35% in this figure, going from $ 9,366 to $ 11,366 million dollars.
Walt Disney Company Cash Flow
Walt Disney Company Cash Flow, as of December 2018 (in millions of dollars).
Cash flow is the variation of cash inflow and outflow, and is used to measure the liquidity of the company, that is, its ability to generate cash. As for the Walt Disney Company, we can see that net income increased 40% compared to December 2017, going from $ 9,366 to $ 13,066 million.
However, both the cash from its operating activities (cash collected from income, payments to suppliers and employees, etc.), and the cash from its investment activities in long-term assets, went from 2017 to 2018 from $ 12,343 to $ 14,295 and from - $ 4,111 to - $ 5,336 million, respectively.
Walt Disney Company Financial Coefficients
Walt Disney Company Financial Coefficients
The P / E ratio is 18.21, showing that there is a high expectation from investors to generate profits by investing in Walt Disney Company. As for beta (1.35), it allows us to know that there is great volatility when buying this stock, which is positive in upside markets such as that of the Walt Disney Company, however, if there is a drop in this, the returns On the other hand, the coefficients Price to Sales (3.99) and Price to Book (3.93) indicate that the action is overvalued and that, with respect to the coefficient presented by the service sector (4.1), the value of the Walt Disney Company stock could provide more returns. The Price to Tangible Book (57.72) and Price to Cash Flow (32.38) coefficients show that, in the same way,the value of the share is overvalued with respect to the fixed assets that Walt Disney Company owns and its operating cash flow.
WDC financial strength financial ratios
In terms of financial strength, the Walt Disney Company is at a disadvantage compared to the service sector. It has ample long-term debt and the leverage levels (LT Debt to Equity) are 34.14%, however, in the sector the debts are higher, they are 221.18%. However, it can cover its interests in a positive way (Interest Coverage of 21.96) and it is also possible, although not like the competition in the sector, to cover its liabilities and short-term debt with relative ease (Quick Ratio and Current Ratio of 0.92 and 1 respectively).
Financial coefficients of profitability WDC
Walt Disney Company has a 44.45% gross margin after covering its costs and an operating profitability of 30%. As for taxes, you pay approximately 22.8% of your income and have 18.99% of profit after covering your costs. Compared to the service sector, it is slightly below the other companies in the sector, however, it should be noted that its percentage of net profits is high.
Financial coefficients of efficiency WDC
In terms of efficiency, the service sector fares better than the Walt Disney Company on all counts. We can see that the company has an income per employee of $ 295,450,000, being less than the $ 654,250,000 of the sector, it collects its debts on credit every 54.41 days, compared to the sector where they are collected every 23.64 days. Financial analysis conclusion:
After having analyzed the financial statements of the Walt Disney Company as of December 2018, as well as having compared the financial ratios of the company with the service sector, I can conclude that the Walt Disney Company is a solid and profitable company, which will continue to grow enormously as well. as it has in the last 20 years. Walt Disney Company leads the way, both in numbers and in original content creation, to industry giants with which it competes today such as Time Warner (TWC), 21st Century Fox (FOX) and Comcast (CMCSA).
At the end of 2019, the Walt Disney Company will offer a new streaming service 'Disney Plus', which will compete with Netflix and Amazon Prime Video. This new online platform will bring multiple benefits, although the company will lose around 150 million pesos in revenue from license payments, it is money that will be recovered quickly thanks to the other services it offers and the immense catalog of series TV and movies from your library, and also with new and exclusive content. Without a doubt, he would invest in shares of the Walt Disney Company.
References:
- Disney News (2012). Disney history. Last accessed on April 13, 2019, from: http://www.mundodisney.net/noticias/2012/noviembre/disney/Financial Magazine (2019). Who is the Disney competition? Last accessed April 17, 2019, from: https://es.talkingofmoney.com/who-are-disney-s-main-competitorscom (2019).Walt Disney Company (DIS). Last accessed on March 18, 2019, from: https://www.reuters.com/finance/stocks/financial-highlights/DIS.Nom (2019). Walt Disney Company (DIS). Last accessed on March 18, 2019, from: https: //www.investing.com/equities/disney
