Intrinsic value of Walt Disney - DIS

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$105.57

  Intrinsic Value

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  Value-price divergence*

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$105.57

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of DIS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 166.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.04
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
Revenue, $m
  55,632
  58,970
  62,449
  66,077
  69,863
  73,815
  77,941
  82,252
  86,758
  91,470
  96,398
  101,554
  106,950
  112,600
  118,516
  124,713
  131,205
  138,009
  145,139
  152,614
  160,451
  168,668
  177,286
  186,325
  195,807
  205,753
  216,189
  227,138
  238,627
  250,683
  263,335
Variable operating expenses, $m
 
  39,579
  41,750
  44,014
  46,376
  48,842
  51,417
  54,107
  56,919
  59,859
  62,934
  63,371
  66,738
  70,263
  73,955
  77,822
  81,873
  86,119
  90,568
  95,233
  100,123
  105,251
  110,629
  116,269
  122,185
  128,392
  134,904
  141,736
  148,906
  156,429
  164,324
Fixed operating expenses, $m
 
  4,107
  4,210
  4,315
  4,423
  4,534
  4,647
  4,763
  4,882
  5,004
  5,129
  5,258
  5,389
  5,524
  5,662
  5,803
  5,948
  6,097
  6,250
  6,406
  6,566
  6,730
  6,898
  7,071
  7,248
  7,429
  7,614
  7,805
  8,000
  8,200
  8,405
Total operating expenses, $m
  41,430
  43,686
  45,960
  48,329
  50,799
  53,376
  56,064
  58,870
  61,801
  64,863
  68,063
  68,629
  72,127
  75,787
  79,617
  83,625
  87,821
  92,216
  96,818
  101,639
  106,689
  111,981
  117,527
  123,340
  129,433
  135,821
  142,518
  149,541
  156,906
  164,629
  172,729
Operating income, $m
  14,202
  15,284
  16,489
  17,748
  19,064
  20,439
  21,877
  23,382
  24,957
  26,606
  28,334
  32,926
  34,823
  36,813
  38,899
  41,087
  43,383
  45,793
  48,321
  50,975
  53,762
  56,687
  59,759
  62,985
  66,374
  69,932
  73,670
  77,596
  81,721
  86,054
  90,606
EBITDA, $m
  16,729
  19,637
  20,936
  22,291
  23,708
  25,188
  26,737
  28,356
  30,052
  31,827
  33,686
  35,634
  37,675
  39,815
  42,059
  44,413
  46,882
  49,473
  52,192
  55,045
  58,041
  61,185
  64,487
  67,954
  71,595
  75,419
  79,435
  83,653
  88,084
  92,739
  97,628
Interest expense (income), $m
  395
  577
  674
  772
  875
  983
  1,095
  1,212
  1,335
  1,463
  1,596
  1,736
  1,883
  2,036
  2,196
  2,364
  2,540
  2,725
  2,918
  3,120
  3,333
  3,555
  3,789
  4,033
  4,290
  4,559
  4,842
  5,138
  5,449
  5,775
  6,118
Earnings before tax, $m
  14,868
  14,707
  15,816
  16,976
  18,188
  19,456
  20,782
  22,170
  23,622
  25,144
  26,738
  31,189
  32,940
  34,777
  36,702
  38,723
  40,843
  43,068
  45,403
  47,855
  50,429
  53,132
  55,971
  58,952
  62,084
  65,373
  68,828
  72,458
  76,272
  80,279
  84,489
Tax expense, $m
  5,078
  3,971
  4,270
  4,583
  4,911
  5,253
  5,611
  5,986
  6,378
  6,789
  7,219
  8,421
  8,894
  9,390
  9,910
  10,455
  11,028
  11,628
  12,259
  12,921
  13,616
  14,346
  15,112
  15,917
  16,763
  17,651
  18,584
  19,564
  20,593
  21,675
  22,812
Net income, $m
  9,391
  10,736
  11,546
  12,392
  13,277
  14,203
  15,171
  16,184
  17,244
  18,355
  19,519
  22,768
  24,046
  25,387
  26,793
  28,268
  29,815
  31,439
  33,144
  34,934
  36,813
  38,786
  40,859
  43,035
  45,321
  47,722
  50,245
  52,895
  55,679
  58,604
  61,677

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,610
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  92,033
  92,720
  98,190
  103,895
  109,848
  116,061
  122,549
  129,328
  136,413
  143,820
  151,569
  159,676
  168,160
  177,043
  186,346
  196,089
  206,297
  216,995
  228,206
  239,959
  252,281
  265,202
  278,752
  292,964
  307,872
  323,511
  339,919
  357,135
  375,199
  394,155
  414,049
Adjusted assets (=assets-cash), $m
  87,423
  92,720
  98,190
  103,895
  109,848
  116,061
  122,549
  129,328
  136,413
  143,820
  151,569
  159,676
  168,160
  177,043
  186,346
  196,089
  206,297
  216,995
  228,206
  239,959
  252,281
  265,202
  278,752
  292,964
  307,872
  323,511
  339,919
  357,135
  375,199
  394,155
  414,049
Revenue / Adjusted assets
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
Average production assets, $m
  39,586
  41,987
  44,464
  47,047
  49,742
  52,556
  55,494
  58,564
  61,772
  65,127
  68,635
  72,306
  76,148
  80,171
  84,383
  88,795
  93,418
  98,262
  103,339
  108,661
  114,241
  120,092
  126,228
  132,664
  139,414
  146,496
  153,926
  161,722
  169,902
  178,486
  187,495
Working capital, $m
  124
  -826
  -874
  -925
  -978
  -1,033
  -1,091
  -1,152
  -1,215
  -1,281
  -1,350
  -1,422
  -1,497
  -1,576
  -1,659
  -1,746
  -1,837
  -1,932
  -2,032
  -2,137
  -2,246
  -2,361
  -2,482
  -2,609
  -2,741
  -2,881
  -3,027
  -3,180
  -3,341
  -3,510
  -3,687
Total debt, $m
  20,170
  19,246
  22,068
  25,012
  28,083
  31,289
  34,637
  38,135
  41,791
  45,613
  49,611
  53,795
  58,173
  62,756
  67,556
  72,584
  77,851
  83,371
  89,156
  95,221
  101,579
  108,246
  115,238
  122,572
  130,264
  138,334
  146,800
  155,683
  165,005
  174,786
  185,051
Total liabilities, $m
  48,768
  47,844
  50,666
  53,610
  56,681
  59,887
  63,235
  66,733
  70,389
  74,211
  78,209
  82,393
  86,771
  91,354
  96,154
  101,182
  106,449
  111,969
  117,754
  123,819
  130,177
  136,844
  143,836
  151,170
  158,862
  166,932
  175,398
  184,281
  193,603
  203,384
  213,649
Total equity, $m
  43,265
  44,876
  47,524
  50,285
  53,166
  56,173
  59,314
  62,595
  66,024
  69,609
  73,359
  77,283
  81,390
  85,689
  90,191
  94,907
  99,848
  105,025
  110,452
  116,140
  122,104
  128,358
  134,916
  141,795
  149,010
  156,579
  164,521
  172,853
  181,596
  190,771
  200,400
Total liabilities and equity, $m
  92,033
  92,720
  98,190
  103,895
  109,847
  116,060
  122,549
  129,328
  136,413
  143,820
  151,568
  159,676
  168,161
  177,043
  186,345
  196,089
  206,297
  216,994
  228,206
  239,959
  252,281
  265,202
  278,752
  292,965
  307,872
  323,511
  339,919
  357,134
  375,199
  394,155
  414,049
Debt-to-equity ratio
  0.466
  0.430
  0.460
  0.500
  0.530
  0.560
  0.580
  0.610
  0.630
  0.660
  0.680
  0.700
  0.710
  0.730
  0.750
  0.760
  0.780
  0.790
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.920
Adjusted equity ratio
  0.442
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9,391
  10,736
  11,546
  12,392
  13,277
  14,203
  15,171
  16,184
  17,244
  18,355
  19,519
  22,768
  24,046
  25,387
  26,793
  28,268
  29,815
  31,439
  33,144
  34,934
  36,813
  38,786
  40,859
  43,035
  45,321
  47,722
  50,245
  52,895
  55,679
  58,604
  61,677
Depreciation, amort., depletion, $m
  2,527
  4,354
  4,446
  4,543
  4,644
  4,749
  4,859
  4,974
  5,095
  5,220
  5,352
  2,708
  2,852
  3,003
  3,160
  3,326
  3,499
  3,680
  3,870
  4,070
  4,279
  4,498
  4,728
  4,969
  5,222
  5,487
  5,765
  6,057
  6,363
  6,685
  7,022
Funds from operations, $m
  12,311
  15,090
  15,992
  16,935
  17,922
  18,952
  20,030
  21,158
  22,339
  23,575
  24,870
  25,476
  26,898
  28,390
  29,953
  31,593
  33,314
  35,120
  37,015
  39,004
  41,092
  43,284
  45,586
  48,004
  50,543
  53,209
  56,010
  58,952
  62,042
  65,288
  68,699
Change in working capital, $m
  -902
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -153
  -161
  -169
  -177
Cash from operations, $m
  13,213
  16,188
  16,041
  16,986
  17,975
  19,008
  20,088
  21,219
  22,402
  23,641
  24,939
  25,548
  26,974
  28,469
  30,036
  31,680
  33,405
  35,215
  37,115
  39,108
  41,202
  43,399
  45,707
  48,130
  50,675
  53,348
  56,156
  59,105
  62,203
  65,457
  68,876
Maintenance CAPEX, $m
  0
  -1,483
  -1,573
  -1,665
  -1,762
  -1,863
  -1,968
  -2,078
  -2,193
  -2,314
  -2,439
  -2,571
  -2,708
  -2,852
  -3,003
  -3,160
  -3,326
  -3,499
  -3,680
  -3,870
  -4,070
  -4,279
  -4,498
  -4,728
  -4,969
  -5,222
  -5,487
  -5,765
  -6,057
  -6,363
  -6,685
New CAPEX, $m
  -4,773
  -2,401
  -2,477
  -2,583
  -2,695
  -2,813
  -2,938
  -3,070
  -3,208
  -3,355
  -3,509
  -3,671
  -3,842
  -4,022
  -4,212
  -4,412
  -4,623
  -4,844
  -5,077
  -5,322
  -5,580
  -5,851
  -6,136
  -6,436
  -6,751
  -7,082
  -7,430
  -7,796
  -8,180
  -8,584
  -9,008
Cash from investing activities, $m
  -5,758
  -3,884
  -4,050
  -4,248
  -4,457
  -4,676
  -4,906
  -5,148
  -5,401
  -5,669
  -5,948
  -6,242
  -6,550
  -6,874
  -7,215
  -7,572
  -7,949
  -8,343
  -8,757
  -9,192
  -9,650
  -10,130
  -10,634
  -11,164
  -11,720
  -12,304
  -12,917
  -13,561
  -14,237
  -14,947
  -15,693
Free cash flow, $m
  7,455
  12,304
  11,991
  12,738
  13,517
  14,331
  15,182
  16,071
  17,000
  17,973
  18,991
  19,307
  20,424
  21,594
  22,821
  24,107
  25,457
  26,872
  28,357
  29,916
  31,552
  33,270
  35,073
  36,967
  38,956
  41,045
  43,239
  45,544
  47,966
  50,510
  53,183
Issuance/(repayment) of debt, $m
  2,940
  2,763
  2,823
  2,944
  3,071
  3,206
  3,348
  3,498
  3,656
  3,822
  3,998
  4,183
  4,378
  4,584
  4,800
  5,028
  5,267
  5,520
  5,785
  6,064
  6,358
  6,667
  6,992
  7,333
  7,692
  8,070
  8,466
  8,883
  9,321
  9,781
  10,265
Issuance/(repurchase) of shares, $m
  -7,240
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -4,678
  2,763
  2,823
  2,944
  3,071
  3,206
  3,348
  3,498
  3,656
  3,822
  3,998
  4,183
  4,378
  4,584
  4,800
  5,028
  5,267
  5,520
  5,785
  6,064
  6,358
  6,667
  6,992
  7,333
  7,692
  8,070
  8,466
  8,883
  9,321
  9,781
  10,265
Total cash flow (excl. dividends), $m
  2,654
  15,067
  14,814
  15,681
  16,588
  17,537
  18,530
  19,568
  20,656
  21,796
  22,989
  23,490
  24,802
  26,178
  27,621
  29,135
  30,724
  32,392
  34,143
  35,980
  37,910
  39,937
  42,065
  44,300
  46,648
  49,115
  51,706
  54,427
  57,287
  60,291
  63,448
Retained Cash Flow (-), $m
  1,260
  -2,534
  -2,648
  -2,761
  -2,881
  -3,007
  -3,140
  -3,281
  -3,429
  -3,585
  -3,750
  -3,924
  -4,107
  -4,299
  -4,502
  -4,716
  -4,941
  -5,177
  -5,426
  -5,688
  -5,964
  -6,254
  -6,558
  -6,879
  -7,215
  -7,569
  -7,941
  -8,332
  -8,743
  -9,175
  -9,628
Prev. year cash balance distribution, $m
 
  923
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  13,455
  12,166
  12,920
  13,708
  14,530
  15,389
  16,287
  17,227
  18,210
  19,239
  19,566
  20,695
  21,878
  23,119
  24,419
  25,783
  27,214
  28,716
  30,292
  31,946
  33,683
  35,507
  37,422
  39,433
  41,545
  43,764
  46,095
  48,544
  51,116
  53,819
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  12,900
  11,137
  11,244
  11,287
  11,262
  11,169
  11,004
  10,767
  10,461
  10,086
  9,292
  8,831
  8,319
  7,761
  7,169
  6,552
  5,921
  5,288
  4,664
  4,059
  3,484
  2,946
  2,453
  2,008
  1,616
  1,277
  989
  751
  558
  405
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Walt Disney Company, together with its subsidiaries, operates as an entertainment company worldwide. The company’s Media Networks segment operates cable programming services, including the ESPN, Disney channels, and Freeform networks; broadcast businesses, which include the ABC TV Network and eight owned television stations; radio businesses consisting of the ESPN Radio Network; and the Radio Disney network. It also produces and sells original live-action and animated television programming to first-run syndication and other television markets, as well as subscription video on demand services and in home entertainment formats, such as DVD, Blu-Ray, and iTunes. Its Parks and Resorts segment owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. This segment also operates Disney Resort & Spa in Hawaii, Disney Vacation Club, Disney Cruise Line, and Adventures by Disney; and manages Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort, as well as licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan. The company’s Studio Entertainment segment produces and acquires live-action and animated motion pictures for distribution in the theatrical, home entertainment, and television markets primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and Touchstone banners. This segment also produces stage plays and musical recordings; licenses and produces live entertainment events; and provides visual and audio effects, and other post-production services. Its Consumer Products & Interactive Media segment licenses its trade names, characters, and visual and literary properties; develops and publishes games for mobile platforms; and sells its products through The Disney Store, DisneyStore.com, and MarvelStore.com, as well as directly to retailers. The company was founded in 1923 and is based in Burbank, California.

FINANCIAL RATIOS  of  Walt Disney (DIS)

Valuation Ratios
P/E Ratio 18
Price to Sales 3
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 20
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.9%
Cap. Spend. - 3 Yr. Gr. Rate 11.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 38.1%
Total Debt to Equity 46.6%
Interest Coverage 39
Management Effectiveness
Return On Assets 10.7%
Ret/ On Assets - 3 Yr. Avg. 10%
Return On Total Capital 15%
Ret/ On T. Cap. - 3 Yr. Avg. 13.8%
Return On Equity 21.4%
Return On Equity - 3 Yr. Avg. 18.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 46.1%
Gross Margin - 3 Yr. Avg. 46%
EBITDA Margin 32%
EBITDA Margin - 3 Yr. Avg. 31.3%
Operating Margin 25.5%
Oper. Margin - 3 Yr. Avg. 24.7%
Pre-Tax Margin 26.7%
Pre-Tax Margin - 3 Yr. Avg. 26.1%
Net Profit Margin 16.9%
Net Profit Margin - 3 Yr. Avg. 16.1%
Effective Tax Rate 34.2%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio 24.6%

DIS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DIS stock intrinsic value calculation we used $55632 million for the last fiscal year's total revenue generated by Walt Disney. The default revenue input number comes from 2016 income statement of Walt Disney. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DIS stock valuation model: a) initial revenue growth rate of 6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DIS is calculated based on our internal credit rating of Walt Disney, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Walt Disney.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DIS stock the variable cost ratio is equal to 67.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4007 million in the base year in the intrinsic value calculation for DIS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Walt Disney.

Corporate tax rate of 27% is the nominal tax rate for Walt Disney. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DIS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DIS are equal to 71.2%.

Life of production assets of 26.7 years is the average useful life of capital assets used in Walt Disney operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DIS is equal to -1.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $43265 million for Walt Disney - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1579.25 million for Walt Disney is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Walt Disney at the current share price and the inputted number of shares is $166.7 billion.


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Stock chart of DIS Financial statements of DIS Annual reports of DIS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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