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 19.47% in 2020 to a projected 20.12% 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$-36.165 billion in 2020 to US$-26.905 billion in 2022, it increased again in 2023 to US$-30.694 billion. Projections indicate a continued, though diminishing, negative economic profit of US$-21.074 billion in 2025. The trend suggests that, despite improvements in NOPAT, the cost of capital continues to exceed operating profits, resulting in value destruction.

Overall, the analysis indicates a sustained period of economic loss. While NOPAT is projected to improve, the increasing cost of capital and the continued negative economic profit suggest a need for strategic review to enhance profitability and capital allocation efficiency.

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 still negative, trend over the observed period. While economic profit remains negative throughout, the magnitude of the loss appears to be decreasing relative to invested capital. Invested capital itself exhibits relative stability, with a slight decrease observed in the later years.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and the weighted average cost of capital, begins at -20.71% in 2020. A consistent, albeit uneven, improvement is then noted, reaching -12.75% by 2025. This indicates a narrowing gap between the company’s returns and its cost of capital. The largest single-year improvement occurs between 2024 and 2025.

Economic profit consistently registers as a negative value across the entire period. The absolute value of economic profit decreased from US$36,165 million in 2020 to US$21,074 million in 2025, suggesting a reduction in the scale of the economic loss. However, a slight increase in the absolute value of economic profit is observed between 2022 and 2023.

Invested Capital

Invested capital remains relatively stable between 2020 and 2023, fluctuating around US$173 million. A noticeable decrease is then observed in 2024 and 2025, falling to US$165.308 million. This reduction in invested capital may contribute to the observed improvement in the economic spread ratio, as the negative economic profit is being generated from a smaller capital base.

In summary, the company’s financial performance, as indicated by these metrics, shows a trend toward improved efficiency in capital allocation. While still generating an economic loss, the rate of loss relative to capital employed is diminishing, and the overall capital base is slightly contracting.

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. A review of the figures indicates a trend toward improved, though still negative, economic profitability.

Economic Profit

Economic profit exhibits a fluctuating, yet generally improving, trend. Beginning at negative US$36,165 million in 2020, it decreased to negative US$31,930 million in 2021, then improved to negative US$26,905 million in 2022. A slight decrease was observed in 2023, with economic profit at negative US$30,694 million, before resuming an upward trend, reaching negative US$21,074 million in 2025. This suggests a gradual reduction in the absolute amount of economic loss.

Adjusted Revenues

Adjusted revenues consistently increased throughout the period. Starting at US$64,920 million in 2020, revenues rose to US$67,865 million in 2021, then experienced a more substantial increase to US$84,532 million in 2022. This growth continued, reaching US$88,985 million in 2023, US$91,261 million in 2024, and finally US$94,454 million in 2025. The consistent revenue growth indicates a positive trajectory in sales performance.

Economic Profit Margin

The economic profit margin, calculated as a percentage, consistently reflects negative economic profit. The margin began at -55.71% in 2020 and improved to -47.05% in 2021. Further improvement was seen in 2022, with a margin of -31.83%. A slight deterioration occurred in 2023, with the margin at -34.49%, but it resumed its improving trend, reaching -22.31% in 2025. The decreasing negative percentage suggests that, while still incurring an economic loss, the loss is becoming proportionally smaller relative to adjusted revenues. The consistent improvement in the margin, alongside revenue growth, indicates increasing efficiency in generating economic profit, even if absolute economic profit remains negative.

In summary, while economic profit remains negative, the trend across all metrics suggests a positive development. The combination of increasing revenues and a diminishing negative economic profit margin indicates a strengthening financial position, though further analysis is required to determine if and when the company will achieve positive economic profit.