Stock Analysis on Net
Stock Analysis on Net

Walt Disney Co. (NYSE:DIS)

Present Value of Free Cash Flow to Equity (FCFE) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Walt Disney Co., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 16.56%
01 FCFE0 7,159
1 FCFE1 7,272 = 7,159 × (1 + 1.57%) 6,239
2 FCFE2 7,586 = 7,272 × (1 + 4.33%) 5,584
3 FCFE3 8,123 = 7,586 × (1 + 7.08%) 5,130
4 FCFE4 8,922 = 8,123 × (1 + 9.83%) 4,834
5 FCFE5 10,045 = 8,922 × (1 + 12.59%) 4,669
5 Terminal value (TV5) 284,657 = 10,045 × (1 + 12.59%) ÷ (16.56% – 12.59%) 132,311
Intrinsic value of Walt Disney Co. common stock 158,765
 
Intrinsic value of Walt Disney Co. common stock (per share) $87.67
Current share price $112.03

Based on: 10-K (reporting date: 2024-09-28).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.79%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Walt Disney Co. common stock βDIS 1.31
 
Required rate of return on Walt Disney Co. common stock3 rDIS 16.56%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rDIS = RF + βDIS [E(RM) – RF]
= 4.79% + 1.31 [13.79% – 4.79%]
= 16.56%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Walt Disney Co., PRAT model

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Average Sep 28, 2024 Sep 30, 2023 Oct 1, 2022 Oct 2, 2021 Oct 3, 2020 Sep 28, 2019
Selected Financial Data (US$ in millions)
Dividends 1,366 — — — 1,587 2,895
Net income (loss) attributable to The Walt Disney Company (Disney) 4,972 2,354 3,145 1,995 (2,864) 11,054
Revenues 91,361 88,898 82,722 67,418 65,388 69,570
Total assets 196,219 205,579 203,631 203,609 201,549 193,984
Total Disney Shareholder’s equity 100,696 99,277 95,008 88,553 83,583 88,877
Financial Ratios
Retention rate1 0.73 1.00 1.00 1.00 — 0.74
Profit margin2 5.44% 2.65% 3.80% 2.96% -4.38% 15.89%
Asset turnover3 0.47 0.43 0.41 0.33 0.32 0.36
Financial leverage4 1.95 2.07 2.14 2.30 2.41 2.18
Averages
Retention rate 0.89
Profit margin 2.09%
Asset turnover 0.39
Financial leverage 2.18
 
FCFE growth rate (g)5 1.57%

Based on: 10-K (reporting date: 2024-09-28), 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-10-01), 10-K (reporting date: 2021-10-02), 10-K (reporting date: 2020-10-03), 10-K (reporting date: 2019-09-28).

2024 Calculations

1 Retention rate = (Net income (loss) attributable to The Walt Disney Company (Disney) – Dividends) ÷ Net income (loss) attributable to The Walt Disney Company (Disney)
= (4,972 – 1,366) ÷ 4,972
= 0.73

2 Profit margin = 100 × Net income (loss) attributable to The Walt Disney Company (Disney) ÷ Revenues
= 100 × 4,972 ÷ 91,361
= 5.44%

3 Asset turnover = Revenues ÷ Total assets
= 91,361 ÷ 196,219
= 0.47

4 Financial leverage = Total assets ÷ Total Disney Shareholder’s equity
= 196,219 ÷ 100,696
= 1.95

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.89 × 2.09% × 0.39 × 2.18
= 1.57%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (202,880 × 16.56% – 7,159) ÷ (202,880 + 7,159)
= 12.59%

where:
Equity market value0 = current market value of Walt Disney Co. common stock (US$ in millions)
FCFE0 = the last year Walt Disney Co. free cash flow to equity (US$ in millions)
r = required rate of return on Walt Disney Co. common stock

FCFE growth rate (g) forecast

Walt Disney Co., H-model

Microsoft Excel
Year Value gt
1 g1 1.57%
2 g2 4.33%
3 g3 7.08%
4 g4 9.83%
5 and thereafter g5 12.59%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 1.57% + (12.59% – 1.57%) × (2 – 1) ÷ (5 – 1)
= 4.33%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 1.57% + (12.59% – 1.57%) × (3 – 1) ÷ (5 – 1)
= 7.08%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 1.57% + (12.59% – 1.57%) × (4 – 1) ÷ (5 – 1)
= 9.83%