Is Walt Disney (DIS) Fairly Priced After Media Restructuring And Theme Park Growth Focus?

• If you are wondering whether Walt Disney's current share price is a fair deal or not, this article will walk through what the numbers are actually saying about the stock.
• The shares last closed at US$112.91, with returns of 4.9% over 30 days, 0.9% year to date and 4.0% over 1 year, while the 3 year return is 20.0% and the 5 year return is a 34.4% decline.
• Recent headlines around Disney have focused on its ongoing efforts to reshape its media and entertainment businesses, including content decisions and changes across its traditional and streaming operations. At the same time, its theme parks and experiences segment continues to feature prominently in discussions about how the company balances growth opportunities with capital allocation.
• On Simply Wall St's 6 point valuation checklist, Disney scores 3 out of 6. This suggests the stock screens as undervalued on some measures and less so on others. We will walk through those methods next, before looking at an even more complete way to think about what the shares might be worth.

Find out why Walt Disney's 4.0% return over the last year is lagging behind its peers.

Approach 1: Walt Disney Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes estimates of the cash a company could generate in the future and discounts those amounts back to today, aiming to arrive at an estimate of what the business might be worth right now.

For Walt Disney, the latest twelve month free cash flow is about $11.8b. Analysts provide forecasts for several years, and Simply Wall St then extrapolates further, with projected free cash flow of around $12.2b in 2035. These future cash flows, including interim years such as the $10.1b projected for 2026 and $10.5b for 2028, are discounted using a 2 Stage Free Cash Flow to Equity model.

On this basis, the estimated intrinsic value comes out at roughly $82.58 per share, compared with the recent share price of $112.91. That implies the stock screens as around 36.7% overvalued using this particular DCF approach.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Walt Disney may be overvalued by 36.7%. Discover 885 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Walt Disney.

Approach 2: Walt Disney Price vs Earnings

For a company that is generating earnings, the P/E ratio is a common way to see what investors are currently paying for each dollar of profit. This makes it a useful cross check against the DCF result you saw earlier.

What counts as a “normal” P/E depends on what investors expect for future growth and how much risk they see in those earnings. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth expectations or higher risk tend to line up with a lower multiple.

Disney currently trades on a P/E of about 16.25x, compared with the Entertainment industry average of roughly 18.00x and a peer group average of about 89.95x. Simply Wall St’s Fair Ratio for Disney is 24.87x, which is its proprietary view of what the P/E might be, given factors such as earnings growth, profit margins, industry, market cap and company specific risks.

This Fair Ratio aims to be more tailored than a simple comparison to peers or the industry, because it brings those business characteristics into one number. When compared with the current P/E of 16.25x, the Fair Ratio of 24.87x indicates that Disney’s shares appear undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1450 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Walt Disney Narrative

Earlier we mentioned that there is an even better way to think about valuation. On Simply Wall St’s Community page you can use Narratives, where you tell the story you believe about Walt Disney, plug in your own expectations for future revenue, earnings and margins, and the platform links that story to a full forecast, a fair value, and a clear comparison between that fair value and today’s price. This updates as new news or earnings arrive, so two investors might both look at the same company but reach very different views. For example, one Narrative could assume a fair value of about US$131.50 based on streaming profitability, ESPN’s role and Experiences growth, while another could point to a fair value closer to US$79.00 based on more cautious assumptions about future earnings and risk.

Do you think there's more to the story for Walt Disney? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com