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A Look at Disney’s Valuation Metrics

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Nov. 8 2016, Updated 11:04 a.m. ET

Valuation metrics

In this part of the series, we’ll look at some key metrics investors can use to compare the values of media companies. Specifically, we’ll look at media valuation multiples.

Some valuation metrics include the PE (price-to-earnings), EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), PCF (price-to-cash flow), and PFCF (price-to-free cash flow) multiples.

Price-based multiples measure value from a shareholder’s perspective. Enterprise value–based multiples help investors understand a company’s value from the perspective of the holders of its sources of capital. These are forward multiples based on expected value after a year.

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Is Disney overvalued?

As the graph above indicates, The Walt Disney Company (DIS) has a high forward EV-to-EBITDA multiple of 9.4x. Peers 21st Century Fox (FOXA), Time Warner (TWX), Viacom (VIAB), and CBS (CBS) have forward EV-to-EBITDA multiples of 8.6x, 10.2x, 8.4x, and 9.5x, respectively. Disney is trading at a high price-to-earnings multiple of 15.3x.

Disney’s value proposition

Disney stands out from its competitors in the media industry due to its large amount of intellectual property. The company monetizes these assets successfully across its segments. It accomplishes this through the creation of content that uses its intellectual property, whether it’s retailing merchandise or attractions at its theme parks that showcase Disney characters. The company is also trying to strengthen ESPN’s competitive position by distributing it across multiple platforms in the United States as well as in international markets.

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