Intrinsic value of Walt Disney - DIS

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$106.83

  Intrinsic Value

$104.06

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  Rating & Target

hold

-3%

Previous close

$106.83

 
Intrinsic value

$104.06

 
Up/down potential

-3%

 
Rating

hold

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 164.9

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  55,632
  56,745
  58,050
  59,542
  61,217
  63,072
  65,109
  67,326
  69,726
  72,312
  75,087
  78,056
  81,224
  84,597
  88,182
  91,986
  96,017
  100,284
  104,797
  109,565
  114,599
  119,911
  125,513
  131,418
  137,639
  144,192
  151,091
  158,352
  165,994
  174,033
  182,489
Variable operating expenses, $m
 
  38,190
  39,005
  39,936
  40,981
  42,139
  43,410
  44,793
  46,291
  47,905
  49,636
  48,708
  50,685
  52,790
  55,027
  57,400
  59,916
  62,578
  65,394
  68,370
  71,511
  74,826
  78,321
  82,006
  85,888
  89,977
  94,282
  98,814
  103,582
  108,598
  113,875
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
  42,297
  43,215
  44,251
  45,404
  46,673
  48,057
  49,556
  51,173
  52,909
  54,765
  53,966
  56,074
  58,314
  60,689
  63,203
  65,864
  68,675
  71,644
  74,776
  78,077
  81,556
  85,219
  89,077
  93,136
  97,406
  101,896
  106,619
  111,582
  116,798
  122,280
Operating income, $m
  14,202
  14,447
  14,835
  15,291
  15,813
  16,400
  17,052
  17,770
  18,553
  19,403
  20,322
  24,091
  25,151
  26,284
  27,494
  28,782
  30,153
  31,609
  33,153
  34,789
  36,522
  38,355
  40,293
  42,341
  44,503
  46,786
  49,194
  51,734
  54,412
  57,235
  60,209
EBITDA, $m
  16,729
  18,741
  19,164
  19,660
  20,226
  20,863
  21,570
  22,346
  23,194
  24,113
  25,105
  26,172
  27,316
  28,540
  29,845
  31,235
  32,713
  34,283
  35,947
  37,711
  39,578
  41,553
  43,640
  45,845
  48,174
  50,631
  53,223
  55,957
  58,838
  61,875
  65,075
Interest expense (income), $m
  395
  577
  610
  647
  690
  737
  790
  848
  911
  979
  1,052
  1,131
  1,216
  1,306
  1,401
  1,503
  1,611
  1,726
  1,847
  1,975
  2,110
  2,253
  2,404
  2,563
  2,731
  2,908
  3,094
  3,289
  3,496
  3,713
  3,941
Earnings before tax, $m
  14,868
  13,870
  14,225
  14,643
  15,123
  15,663
  16,262
  16,922
  17,642
  18,424
  19,269
  22,960
  23,935
  24,978
  26,092
  27,279
  28,542
  29,883
  31,306
  32,814
  34,412
  36,102
  37,889
  39,778
  41,772
  43,878
  46,100
  48,444
  50,916
  53,522
  56,268
Tax expense, $m
  5,078
  3,745
  3,841
  3,954
  4,083
  4,229
  4,391
  4,569
  4,763
  4,975
  5,203
  6,199
  6,462
  6,744
  7,045
  7,365
  7,706
  8,068
  8,453
  8,860
  9,291
  9,748
  10,230
  10,740
  11,279
  11,847
  12,447
  13,080
  13,747
  14,451
  15,192
Net income, $m
  9,391
  10,125
  10,384
  10,690
  11,040
  11,434
  11,871
  12,353
  12,879
  13,450
  14,067
  16,760
  17,472
  18,234
  19,047
  19,914
  20,836
  21,815
  22,853
  23,955
  25,121
  26,354
  27,659
  29,038
  30,494
  32,031
  33,653
  35,364
  37,169
  39,071
  41,076

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
  89,221
  91,273
  93,619
  96,252
  99,171
  102,372
  105,859
  109,633
  113,699
  118,062
  122,730
  127,711
  133,015
  138,651
  144,632
  150,970
  157,680
  164,775
  172,272
  180,187
  188,539
  197,347
  206,631
  216,414
  226,716
  237,564
  248,982
  260,996
  273,637
  286,932
Adjusted assets (=assets-cash), $m
  87,423
  89,221
  91,273
  93,619
  96,252
  99,171
  102,372
  105,859
  109,633
  113,699
  118,062
  122,730
  127,711
  133,015
  138,651
  144,632
  150,970
  157,680
  164,775
  172,272
  180,187
  188,539
  197,347
  206,631
  216,414
  226,716
  237,564
  248,982
  260,996
  273,637
  286,932
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
  40,402
  41,331
  42,394
  43,586
  44,908
  46,357
  47,936
  49,645
  51,486
  53,462
  55,576
  57,832
  60,233
  62,786
  65,494
  68,364
  71,402
  74,615
  78,010
  81,594
  85,377
  89,365
  93,569
  97,999
  102,664
  107,577
  112,747
  118,188
  123,911
  129,932
Working capital, $m
  124
  -794
  -813
  -834
  -857
  -883
  -912
  -943
  -976
  -1,012
  -1,051
  -1,093
  -1,137
  -1,184
  -1,235
  -1,288
  -1,344
  -1,404
  -1,467
  -1,534
  -1,604
  -1,679
  -1,757
  -1,840
  -1,927
  -2,019
  -2,115
  -2,217
  -2,324
  -2,436
  -2,555
Total debt, $m
  20,170
  17,440
  18,499
  19,709
  21,068
  22,574
  24,226
  26,025
  27,972
  30,070
  32,322
  34,731
  37,301
  40,038
  42,946
  46,032
  49,303
  52,765
  56,426
  60,294
  64,378
  68,688
  73,233
  78,024
  83,071
  88,388
  93,985
  99,877
  106,076
  112,598
  119,459
Total liabilities, $m
  48,768
  46,038
  47,097
  48,307
  49,666
  51,172
  52,824
  54,623
  56,570
  58,668
  60,920
  63,329
  65,899
  68,636
  71,544
  74,630
  77,901
  81,363
  85,024
  88,892
  92,976
  97,286
  101,831
  106,622
  111,669
  116,986
  122,583
  128,475
  134,674
  141,196
  148,057
Total equity, $m
  43,265
  43,183
  44,176
  45,312
  46,586
  47,999
  49,548
  51,236
  53,062
  55,030
  57,142
  59,401
  61,812
  64,379
  67,107
  70,002
  73,070
  76,317
  79,751
  83,379
  87,210
  91,253
  95,516
  100,010
  104,744
  109,731
  114,981
  120,507
  126,322
  132,440
  138,875
Total liabilities and equity, $m
  92,033
  89,221
  91,273
  93,619
  96,252
  99,171
  102,372
  105,859
  109,632
  113,698
  118,062
  122,730
  127,711
  133,015
  138,651
  144,632
  150,971
  157,680
  164,775
  172,271
  180,186
  188,539
  197,347
  206,632
  216,413
  226,717
  237,564
  248,982
  260,996
  273,636
  286,932
Debt-to-equity ratio
  0.466
  0.400
  0.420
  0.430
  0.450
  0.470
  0.490
  0.510
  0.530
  0.550
  0.570
  0.580
  0.600
  0.620
  0.640
  0.660
  0.670
  0.690
  0.710
  0.720
  0.740
  0.750
  0.770
  0.780
  0.790
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
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
  10,125
  10,384
  10,690
  11,040
  11,434
  11,871
  12,353
  12,879
  13,450
  14,067
  16,760
  17,472
  18,234
  19,047
  19,914
  20,836
  21,815
  22,853
  23,955
  25,121
  26,354
  27,659
  29,038
  30,494
  32,031
  33,653
  35,364
  37,169
  39,071
  41,076
Depreciation, amort., depletion, $m
  2,527
  4,294
  4,329
  4,369
  4,413
  4,463
  4,517
  4,576
  4,640
  4,709
  4,783
  2,082
  2,166
  2,256
  2,352
  2,453
  2,560
  2,674
  2,795
  2,922
  3,056
  3,198
  3,347
  3,504
  3,670
  3,845
  4,029
  4,223
  4,427
  4,641
  4,866
Funds from operations, $m
  12,311
  14,420
  14,713
  15,058
  15,453
  15,897
  16,389
  16,929
  17,519
  18,159
  18,850
  18,842
  19,638
  20,490
  21,399
  22,367
  23,396
  24,489
  25,648
  26,876
  28,177
  29,552
  31,006
  32,542
  34,164
  35,876
  37,682
  39,587
  41,595
  43,712
  45,942
Change in working capital, $m
  -902
  -16
  -18
  -21
  -23
  -26
  -29
  -31
  -34
  -36
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -102
  -107
  -113
  -118
Cash from operations, $m
  13,213
  14,435
  14,731
  15,079
  15,477
  15,923
  16,417
  16,960
  17,553
  18,195
  18,889
  18,884
  19,683
  20,537
  21,449
  22,420
  23,452
  24,549
  25,711
  26,943
  28,247
  29,626
  31,084
  32,625
  34,251
  35,968
  37,779
  39,689
  41,702
  43,824
  46,060
Maintenance CAPEX, $m
  0
  -1,483
  -1,513
  -1,548
  -1,588
  -1,632
  -1,682
  -1,736
  -1,795
  -1,859
  -1,928
  -2,002
  -2,082
  -2,166
  -2,256
  -2,352
  -2,453
  -2,560
  -2,674
  -2,795
  -2,922
  -3,056
  -3,198
  -3,347
  -3,504
  -3,670
  -3,845
  -4,029
  -4,223
  -4,427
  -4,641
New CAPEX, $m
  -4,773
  -817
  -929
  -1,062
  -1,193
  -1,321
  -1,450
  -1,579
  -1,709
  -1,841
  -1,976
  -2,114
  -2,256
  -2,402
  -2,552
  -2,708
  -2,870
  -3,038
  -3,213
  -3,395
  -3,584
  -3,782
  -3,989
  -4,204
  -4,430
  -4,665
  -4,912
  -5,170
  -5,441
  -5,724
  -6,020
Cash from investing activities, $m
  -5,758
  -2,300
  -2,442
  -2,610
  -2,781
  -2,953
  -3,132
  -3,315
  -3,504
  -3,700
  -3,904
  -4,116
  -4,338
  -4,568
  -4,808
  -5,060
  -5,323
  -5,598
  -5,887
  -6,190
  -6,506
  -6,838
  -7,187
  -7,551
  -7,934
  -8,335
  -8,757
  -9,199
  -9,664
  -10,151
  -10,661
Free cash flow, $m
  7,455
  12,136
  12,289
  12,469
  12,696
  12,969
  13,285
  13,645
  14,049
  14,495
  14,985
  14,767
  15,346
  15,970
  16,641
  17,360
  18,129
  18,950
  19,824
  20,754
  21,741
  22,788
  23,898
  25,074
  26,317
  27,632
  29,022
  30,489
  32,039
  33,674
  35,399
Issuance/(repayment) of debt, $m
  2,940
  957
  1,059
  1,210
  1,359
  1,506
  1,652
  1,799
  1,947
  2,098
  2,252
  2,409
  2,570
  2,737
  2,908
  3,086
  3,271
  3,462
  3,661
  3,868
  4,084
  4,310
  4,545
  4,791
  5,048
  5,316
  5,597
  5,892
  6,200
  6,522
  6,860
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
  957
  1,059
  1,210
  1,359
  1,506
  1,652
  1,799
  1,947
  2,098
  2,252
  2,409
  2,570
  2,737
  2,908
  3,086
  3,271
  3,462
  3,661
  3,868
  4,084
  4,310
  4,545
  4,791
  5,048
  5,316
  5,597
  5,892
  6,200
  6,522
  6,860
Total cash flow (excl. dividends), $m
  2,654
  13,093
  13,348
  13,680
  14,055
  14,475
  14,937
  15,444
  15,996
  16,593
  17,236
  17,176
  17,916
  18,706
  19,549
  20,446
  21,400
  22,412
  23,485
  24,622
  25,825
  27,098
  28,443
  29,864
  31,365
  32,948
  34,619
  36,381
  38,239
  40,196
  42,259
Retained Cash Flow (-), $m
  1,260
  -841
  -993
  -1,135
  -1,275
  -1,412
  -1,550
  -1,687
  -1,827
  -1,968
  -2,112
  -2,259
  -2,411
  -2,567
  -2,728
  -2,895
  -3,068
  -3,247
  -3,434
  -3,628
  -3,831
  -4,042
  -4,263
  -4,494
  -4,735
  -4,987
  -5,250
  -5,526
  -5,815
  -6,118
  -6,435
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
 
  13,175
  12,355
  12,544
  12,781
  13,062
  13,388
  13,757
  14,169
  14,625
  15,124
  14,917
  15,505
  16,140
  16,821
  17,552
  18,332
  19,165
  20,051
  20,994
  21,994
  23,056
  24,180
  25,371
  26,630
  27,962
  29,369
  30,855
  32,423
  34,079
  35,824
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
 
  12,632
  11,310
  10,917
  10,524
  10,125
  9,716
  9,294
  8,856
  8,401
  7,929
  7,084
  6,617
  6,137
  5,647
  5,153
  4,659
  4,170
  3,693
  3,232
  2,795
  2,385
  2,006
  1,663
  1,356
  1,088
  857
  662
  502
  372
  270
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 is an entertainment company. The Company operates in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media. The media networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, and radio networks and stations. Under the Parks and Resorts segment, the Company's Walt Disney Imagineering unit designs and develops new theme park concepts and attractions, as well as resort properties. The studio entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. It also develops and publishes games, primarily for mobile platforms, books, magazines and comic books. The Company distributes merchandise directly through retail, online and wholesale businesses. Its cable networks consist of ESPN, the Disney Channels and Freeform.

FINANCIAL RATIOS  of  Walt Disney (DIS)

Valuation Ratios
P/E Ratio 18.2
Price to Sales 3.1
Price to Book 4
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 20.3
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 2% 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 1543.46 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 $164.9 billion.

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COMPANY NEWS

▶ 1 Big Reason Netflix Will Be Fine Without Disney   [Dec-12-17 10:00AM  Motley Fool]
▶ Disney deal with Fox has powerhouse potential   [09:10AM  American City Business Journals]
▶ Why Netflix Shareholders Have Nothing to Worry About   [Dec-11-17 09:34PM  Motley Fool]
▶ Disney Deal Said To Be Near As Comcast Reportedly Backs Out   [05:38PM  Investor's Business Daily]
▶ Disney suspends music executive amid charges of child sexual abuse   [05:10PM  American City Business Journals]
▶ 3 of the Best Trades on the Street   [11:02AM  InvestorPlace]
▶ Disney's Interest In Fox Is All About Streaming   [Dec-10-17 06:23PM  Motley Fool]
▶ [$$] With Disney-Fox Talks, Hopes Rise for a Greenlight on the Sky Deal   [Dec-08-17 11:49PM  The Wall Street Journal]
▶ Disney: If You Buy It, Will They Come?   [02:28PM  Barrons.com]
▶ Disney adds two tech execs to board   [05:55PM  American City Business Journals]
▶ Disney adds two members to the board   [04:21PM  CNBC Videos]
▶ Who's in Charge If Disney Buys Fox Assets?   [11:30AM  Bloomberg Video]
▶ Possible Disney/Fox deal shakes up CEO search   [10:50AM  American City Business Journals]
▶ Possible Disney/Fox deal shakes up search for Bob Iger's successor   [10:20AM  American City Business Journals]
▶ Bitcoin Is Now Bigger Than These Companies   [10:09AM  Investopedia]
▶ Disney: The Mouse Can Roar   [10:07AM  Barrons.com]
▶ Here's How Much 21st Century Fox Could Be Worth Broken Up   [10:00AM  The Wall Street Journal]
▶ What to Make of the DisneyAltice Agreement   [09:00AM  Market Realist]
▶ [$$] Iger Likely to Stay On as Disney CEO Past 2019 if Fox Deal Is Reached   [Dec-06-17 11:59PM  The Wall Street Journal]
▶ Wonder Woman powers Warner Bros. to $5 billion at global box office   [05:40PM  American City Business Journals]
▶ Disneys Fox acquisition could mean more Bob Iger   [05:30PM  American City Business Journals]
Financial statements 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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