Walt Disney Co. (NYSE:DIS)

The financial performance, as measured by economic profit, demonstrates a consistent pattern of negative value creation over the observed period. While net operating profit after taxes (NOPAT) exhibits volatility, it is consistently insufficient to cover the cost of capital employed.

Net Operating Profit After Taxes (NOPAT)

NOPAT began at a negative value in 2020, then increased substantially in 2021 and 2022. A decline occurred in 2023, followed by a recovery in 2024 and a significant increase projected for 2025. Despite these fluctuations, NOPAT remains below the level required to generate positive economic profit.

Cost of Capital

The cost of capital shows a gradual, consistent increase throughout the period, rising from 19.39% in 2020 to a projected 20.04% in 2025. This increasing cost of capital contributes to the persistent negative economic profit.

Invested Capital

Invested capital remained relatively stable between 2020 and 2024, fluctuating within a narrow range around US$173-174 billion. A decrease is projected for 2024 and 2025, falling to US$165.308 billion. This reduction in invested capital, while potentially improving capital efficiency, does not offset the shortfall in NOPAT relative to the cost of capital.

Economic Profit

Economic profit is consistently negative across all observed years. While the magnitude of the loss decreased from US$-36.021 billion in 2020 to US$-26.764 billion in 2022, it increased again in 2023 to US$-30.551 billion. Projections indicate a continued negative economic profit of US$-20.934 billion in 2025, although this represents the smallest loss within the analyzed timeframe. The trend suggests a potential, albeit slow, improvement in value creation, driven primarily by projected increases in NOPAT and a slight reduction in invested capital, but the company continues to destroy economic value.

In summary, the analysis reveals a sustained period of negative economic profit. While NOPAT demonstrates some recovery and invested capital is projected to decrease, the increasing cost of capital and the continued inability of NOPAT to exceed the cost of capital result in ongoing value destruction.

Net Income

The net income attributable has demonstrated robust positive growth in the analyzed periods. Initially, a significant loss of -2864 million USD was recorded, followed by a turnaround to a profit of 1995 million USD in the subsequent period. Thereafter, a consistent upward trajectory is observed, culminating in a substantial net income of 12404 million USD by the latest period. This suggests a strong recovery and improving profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT follows a similar pattern to net income, with an initial negative value of -2176 million USD. A major improvement is noted in the following period, progressing to positive values and showing an overall upward trend. Despite some fluctuations, NOPAT generally increases with peaks reaching 12192 million USD in the last reported period, indicating enhanced operational efficiency and profitability after tax considerations.

Overall Trends and Insights

The data reveals a significant financial turnaround from losses to strong profits over the annual periods. Both net income and NOPAT have shown marked improvements, reflecting successful operational and financial strategies. The consistent increase, especially noticeable in the most recent years, highlights improved business performance and effective management in generating shareholder value.

The financial data reveals notable fluctuations in both income tax expense related to continuing operations and cash operating taxes over the observed periods.

Income Tax Expense (Benefit) on Income from Continuing Operations

This metric displays significant variability. It started at 699 million US dollars in 2020, sharply declined to 25 million in 2021, and then surged to 1,732 million in 2022. In the subsequent years, the value remained elevated at 1,379 million in 2023 and increased further to 1,796 million in 2024, followed by a substantial reversal to a negative figure of -1,428 million in 2025. The pronounced negative value in the final year suggests a tax benefit or credit, marking a distinct departure from previous years’ expenses.

Cash Operating Taxes

Cash operating taxes have generally increased over the years with some volatility. The amount rose from 1,305 million US dollars in 2020 to a peak of 3,100 million in 2023. Although there was a slight decline to 2,982 million in 2024, the value decreased more sharply to 1,546 million in 2025. This trend indicates a build-up of tax payments until 2023, with a marked reduction thereafter.

In summary, both income tax expense and cash operating taxes have seen considerable fluctuations, with the income tax expense showing a notable reversal into a benefit in the last recorded year and cash operating taxes peaking in 2023 before declining significantly. These trends may reflect changes in tax regulations, profitability, or tax strategies implemented in the latest periods.

Total reported debt & leases

The total reported debt and leases demonstrate a clear downward trend over the analyzed periods. Starting from approximately 62.3 billion USD, the figure consistently decreases each year, reaching around 45.4 billion USD by the latest period. This steady reduction in liabilities suggests a strategic effort towards deleveraging and improving the company’s financial stability by lowering its debt burden.

Total Disney Shareholder’s equity

Shareholders' equity shows a consistent upward trajectory throughout the timeline. Beginning at about 83.6 billion USD, it rises continuously to nearly 110 billion USD in the most recent period. This growth in equity indicates strengthening net asset values, which could result from retained earnings, profitable operations, or potentially favorable revaluation adjustments. The increasing equity base enhances the company’s capacity to finance operations through internal sources.

Invested capital

Invested capital remains relatively stable across the periods, fluctuating slightly between approximately 165.3 billion USD and 174.6 billion USD. However, a slight decline is observable in the latter part of the timeline, dropping from the peak near 174.6 billion to around 165.3 billion USD. This suggests a modest reduction in the total capital invested in the company's operations, possibly reflecting asset disposals, operational efficiencies, or capital allocation adjustments.

The economic spread ratio demonstrates a generally improving, though volatile, trend over the observed period. While consistently negative, indicating the company is not generating returns exceeding its cost of capital, the magnitude of the shortfall has decreased in recent years.

Economic Spread Ratio Trend

The economic spread ratio began at -20.63% in 2020 and improved to -18.38% in 2021. A further improvement was noted in 2022, reaching -15.38%. However, the ratio worsened slightly in 2023 to -17.58%, before resuming its improvement, reaching -16.07% in 2024. The most recent observation in 2025 shows a further positive shift, with the ratio at -12.66%.

The invested capital remained relatively stable between 2020 and 2023, fluctuating between US$172,934 million and US$174,594 million. A decrease in invested capital is observed in 2024 and 2025, falling to US$166,066 million and US$165,308 million respectively.

Economic Profit and Invested Capital Relationship

Economic profit remained negative throughout the period, ranging from -US$36,021 million in 2020 to -US$20,934 million in 2025. The decreasing magnitude of economic profit, coupled with the declining invested capital in the later years, contributes to the observed improvement in the economic spread ratio. The relationship suggests that while the company continues to destroy economic value, the rate of destruction is slowing.

The observed trend in the economic spread ratio suggests a potential positive shift in the company’s ability to generate returns on its invested capital, although further analysis is required to determine the sustainability of this improvement and the underlying drivers.

The economic profit margin demonstrates a consistent pattern of negative values over the observed six-year period, although the magnitude of the negative margin has generally decreased. Initial values indicate substantial economic losses, which appear to be moderating in more recent years.

Economic Profit Margin Trend

The economic profit margin begins at -55.49% in 2020 and exhibits a decreasing negative trend through 2025. The margin improves to -46.84% in 2021, then to -31.66% in 2022. A slight increase in the negative margin is observed in 2023, reaching -34.33%, before resuming the improving trend with values of -29.24% in 2024 and -22.16% in 2025. This suggests a gradual reduction in the extent of economic losses generated.

Relationship to Adjusted Revenues

Adjusted revenues show a consistent upward trend throughout the period, increasing from US$64,920 million in 2020 to US$94,454 million in 2025. Despite this revenue growth, economic profit remains negative across all years. The improving economic profit margin, however, indicates that revenue growth is not being entirely offset by the cost of capital, leading to a smaller economic loss as a percentage of revenue.

Economic Profit Trend

The absolute value of economic profit decreases from -US$36,021 million in 2020 to -US$20,934 million in 2025. This decline parallels the improvement in the economic profit margin, confirming that while losses persist, they are diminishing in absolute terms alongside revenue increases.

Overall, the analysis suggests a positive, albeit slow, trajectory in financial performance from an economic value perspective. While the entity continues to destroy economic value, the rate of destruction is decreasing, potentially indicating improved efficiency or a more favorable capital allocation strategy.