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Why Disney (DIS) Stock Looks Pretty Cheap At the Moment

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Disney (DIS - Free Report) is one of the world’s largest entertainment companies, but it has seen its stock price fluctuate pretty widely over the last couple of years as investors assess Disney’s place in a quickly changing media landscape. With that said, now might be a great time to buy Disney stock, especially if its 21st Century Fox (FOXA - Free Report) deal is completed.

Recent News

Fox announced on Wednesday that its shareholders will vote on July 10 about the company’s proposed asset sale to Disney. Meanwhile, Disney called for a similar meeting on that same day to approve issuing equity for its proposed $52.4 billion all-stock purchase of an array of valuable Fox assets, including its film and TV studio, international television rights, cable networks—including highly important regional sports networks—and Fox’s stake in streaming power Hulu.

Most Disney investors would likely love to see this deal go through as it would bolster its content offerings at a time when that might be all that matters, especially as it readies the launch of its Disney branded over-the-top streaming service. But, Disney rival Comcast (CMCSA - Free Report) is also in the running for these same Fox assets.

Even if this potential Fox deal doesn’t go through, Disney’s own studio offerings, along with Marvel and Star Wars, its booming parks and resort business, and even the struggling ESPN, give the historic entrainment giant enough firepower to compete against the likes of Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , and everyone else for years to come.

This might sound a little too simple for some investors, but when looking at some of Disney’s other fundamentals, its stock looks rather attractive and also rather cheap.

Recent Performance

Shares of Disney have climbed 201% over the last 10 years, which outpaces the S&P 500’s 113% climb. However, within the last five years, Disney stock has lagged the index’s nearly 70% surge, up only 55.8%. Still, Disney stock outperformed Fox’s 18% climb and inched by Comcast’s 53.5%—falling just behind Time Warner’s nearly 60% surge.

 

Investors might be disappointed by Disney’s recent decline. Yet the company’s downturn has Disney stock sitting more than $13 per share or roughly 13% below its 52-week high. Not only are Disney shares relatively cheap in the most basic sense, Disney’s current valuation might make some investors salivate.

Valuation

Coming into Thursday, Disney stock was trading at 13.5X forward 12-month Zacks Consensus EPS estimates. Over the last year, Disney has traded as high as 17.8X, with a one-year median of 15.6X. Investors should note that the stock is currently trading at its year-long low, which marks a significant discount to the S&P 500’s 16.8X. 

 

Disney stock has also traded as high as 22X over the last five years, with a five-year median of 17.4X. Investors can see that Disney stock is currently trading not only at its lowest earnings multiple during the last 52 weeks but also at any point over the last five years.

Therefore, investors should be able to say with great confidence that Disney stock appears very attractive at its current level, if not flat out cheap.

Growth Outlook

Moving on, investors should note that Disney’s current bottom line growth projections look strong, which is part of the reasons for its great value.

Disney’s quarterly earnings are expected to surge by over 25% to reach $1.98 per share, based on our current Zacks Consensus Estimates. The company’s full-year earnings are projected touch $7.06 per share, which would mark a nearly 24% expansion.

The company is also expected to see its quarterly revenues climb by 10% to hit $15.69 billion. Disney’s top line is projected to pop by 8% to reach $59.56 billion for the full-year.

Disney is currently a Zacks Rank #3 (Hold) and sports “A” grades for Value and Momentum and a “B” for Growth in our Style Scores system.

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