Walt Disney is a company, which are one of the world’s best providers and producer of information and entertainment through using its collection of brands to identify its services, consumer products, and context. Disney’s main financial goals are to maximize cash flow and earnings and also to allocate capital profitability to growth initiatives, which will generate long-term shareholder value. The Walt Disney Company is the world’s largest entertainment and media with assets including studio entertainment, consumer products, resorts, parks, and media networks. The Walt Disney Company’s media and television network assets include the ten broadcast stations and ABC television networks. Furthermore, Walt Disney’s set of cable networks includes Toon Disney, ABC Family, ESPN (80% ownership), and Disney Channel. Walt Disney Studios generates films through lines such as Walt Disney, Touchstone, Pixar, and Pictures. Based on the current acquisition of Marvel Entertainment, the Walt Disney Company has been able to join the top film producers and comic book publishers.
The Walt Disney Company has established a prestigious history in the entertainment industry, which has managed to stretch for more than 75 years. Since its establishment in 1923, the Walt Disney Company and other businesses have managed to maintain its production of supreme entertainment experiences according to the rich legacy of quality invented content and incomparable storytelling. According to the past decades, Disney has developed into a wider market, through establishing the Disney Channel on cable and subdivisions, which includes Touchstone Pictures to create films. Walt Disney year of analysis, 2012 is an exciting year, which records its financial performance, creativity, and innovation accurately.
The Disney dividend payout is the amount the company committed to pay to its shareholders in the year 2012 dividend payout for this company was $. 033 per share held by each shareholder.
This is one way of measuring the company’s market value. Disney, Walt share price the market value the company’s shares such as equities, preference, etc. The market share price of Disney Company is $ 51.51 per share based on the financial statement of Disney in 10k for the tear 2012.
Market capitalization or market cap refers to the total of the company’s market value, based on the outstanding shares held by the company. Market capitalization is also the same as the price per share of the company times’ total number of shares outstanding. Market capitalization is mathematically arrived by multiplying the total number of shares outstanding (this includes the values of all types of listed corporations’ stocks, common stock, preferred stock, and many others) by the market share price that is the present value of the company. Hence the market capitalization is the public market’s gauge on the company’s worthiness.
Classification of Market capitalization of companies
The Small capitalized companies are those whose market capitalization is below $1B USD and in other classification is (below $2B USD), the middle capitalized companies are those with capital market of between $1-5B and ($2B USD to $10B USD in other classification) and the last classification is large capitalized companies with market capitalizations above $5B USD and in other classification is above $10B USD.
Disney Market Capitalization as the total market value of the company’s equity is one of the various ways of valuing this company. This is arrived by multiplying the stock price of the company by the total number of shares issued, but for those companies with only one type of stock, its market capitalization is arrived at multiplying the current market share price by the total number of shares. For instance, Disney has multiplied types of equities hence it’s market capitalization will be the total of the market capitalization of the different types of shares.
Disney Market Capitalization (2012) = Shares Outstanding X Share Price= 133.75 B
Based on the calculation above are derived from the financial statements of this company, the market capitalization of The Walt Disney Company is 133.75 B USD. This is 447.7% and 764.78% higher than that of the entertainment and Services sector respectively. The market capitalization is 992.76% of all the stock in the diversified industry; this is lower than that of the firm.
Disney expected discounting factor using the Capital Asset Pricing Model
CAPM=RF+Bi * (RP)
The Disney three-month Treasury bill for 2012 as of 1st April is 0.115%. Based on the 10k a financial statement is that the historical risk premium rate is relative to the treasury bills for Disney stock is 8.4%. By applying these two rates. Hence its discounting factor is 9.397%.
Dividend Growth Model
The dividend growth model is that model which determines the intrinsic value of the company’s stock based on the forecasted series of dividends, which grow at a constant rate. This model solves the current value of the infinity series of the forecasted dividend based on the given dividend per share payable in the current year and the predicted dividend growth at constant.
This model is used by the Disney Company because it’s a mature company with broadening market indices and low to moderate rate hence assume a constant growth rate.
Dividend Growth Model is calculated as
Value (2012) = (Current Dividend * (1 + Dividend Growth)) / (Required Return – Dividend Growth)
Stock value (P) =D/K-G
D = Expected dividend per share in the current year of review
G = Growth rate in dividends (in perpetuity)
K = required rate of return for equity investors
Hence P 2012=div 2011 (1 + g) /r-g= 29.98=.35 (1+.1075) /r-. 1075
29.98 (r-. 1075) =. 3876=r= (. 35/$29.98)+10.75%
The data from the 10 k of the financial statements of Disney Company showed a historical dividend growth rate of 10%, while the estimated growth rate is 11.5% up to 2014. The average between the two growth rates is used to arrive at a more accurate forecast of the growth rate that is 10.75% as used in the above calculations. The final calculation gives the rate of return to be 11.92%. This rate of return arrived at is rational in that, the estimated dividend growth rate of 11.5% is closer to 11.92%, and is smaller than 11.92. Based on the Disney financial statement in 10k, the calculated required rate of return and historical rate shows that Disney Company is safer in that its growth rate is stable. This is due to Disney’s ability to maintain a stable growth rate for the last five years of its operation.
Earnings Per Share
Earnings per Share (EPS) are that part of the company’s earnings, which every share of common stock is allocated apportion of it. Earnings per Share are arriving by investors through the net income of a company and minus all the preference dividends, and then divide it by average of outstanding shares. Earnings per share are normally presented in two different ways, such as diluted and basic. Fully diluted Earnings per Share always take into account the effects of options, convertible securities and warrants are always considered by analysts as a more accurate measure.
Disney earns per share (2012) = total earnings attributable to the shareholder/ average shares=3. 38 times
Earnings per Share is an important measure of the current share price of a company, and the investors normal use it to determine the overall profit of the company, especially if it is used by investors to determine company overall profitability when comparing Earnings Per Share of similar companies.
Based on the company discloses, The Walt Disney Company Earnings per Share is 3.38 times, which the same is as 120.92% and 188.89% higher than that of the Services sector and that of Entertainment. Earnings per share of the Diversified industry are 78.84% of all stocks, which is lower than of the firm.
The Price to Earnings ratio is normally used for the valuation of the company current position and is the most popular ratio, which investors consider and monitor on a daily basis. A company with a low Price Earnings ratio of the stock is less risky because, if the company’s profitability falls down means it’s earning is likely to fall down. For instance, if one starts from the lower position its download risk is lowered. Some investors believe that low prices to earnings ratio are directly proportional to low prices because the presented company is at risk. Likewise, a higher Price-earnings ratio means the investors are paying much for each unit of profit.
Disney price-earnings ratio (2012) = Market Value per Share/Earnings per Share = 22.52 times
The Price to Earnings ratio provides ideas to investors on what the market is able and willing to pay as the current earnings for the company.
According to the current financial disclosure of Disney, the price to earning shows that The Walt Disney Company is 22.52 times, which is 52.3% and 34.23% lower than that of the Services sector and entertainment respectively. The price-earnings in the Diversified industry, for all stocks, are higher than that of the company by 16.16%.
In conclusion, based on the Disney Walt financial statement on 10k, this gives a historical rate and the calculated discounting rate arrived at shows that Disney Company is safer because of its stability in terms of dividend growth. This also shows that the Disney Walt Company has been growing at a constant rate for the last five financial years of its operations hence has low risks. The discounting rate of return arrived by using the Capital Asset Pricing Model, which gives 11.92% is higher than that arrived by approximately 2.5%. This shows that beta used was different from the actual beta thus the current weak economy and other estimated factors included may have made it appear lower. Hence Capital Asset Pricing Model is the best model and more accurate measure based on the results arrived at, such as 11.92%, which is higher than that the historical rate. Capita Asset Pricing Model is also more accurate due to its use of actual present market values, which decreases the application of estimates within the dividend discounted model application. Disney Walt is one member of market capitalization, which one method where the public uses as a way of gauging the company’s worthiness. Hence Disney has enabled the public to gauge its worthiness. According to the current financial disclosure of Disney, the price to earning shows that The Walt Disney Company is 22.52 times, which is 52.3% and 34.23% lower than that of the Services sector and entertainment respectively. The price-earnings in the Diversified industry, for all stocks, are higher than that of the company by 16.16%. This shows that Disney Company has a low Price Earnings ratio of a stock, thus less risky because, if the profitability of Disney falls down its earnings will also fall down. This enables the investors, believers, that low prices to earnings ratio are directly proportional to low price because the presented company is at less risk.