Walt Disney Co. - Company and Investment Ovewview

Company History & Overview

Between the resorts, motion pictures, and merchandising Disney has done it right. They have diversified the company. With not focusing all their attention on one product or idea they have become well know all over the world. Most families take their kids there at least once, and some families return every year to the resorts. It is a child’s dream to go to Disney World and when you get there you cannot imagine anything better as a child.

The Disney Company was founded in 1923. The company’s foundation was studio entertainment. Disney distributes pictures under Walt Disney Pictures, Touchstone Pictures, Miramax Films, Buena Vista and many more. Everyone knows Disney movies, Bambi, Cinderella, Beauty & the Beast, etc, they were the movies that most generations watched while they were growing up, and are now being shown to their children.

Along with the motion pictures Disney has resorts around the world. There are two resorts in the United States, one in Chiba, France, and Lantau Island. Not only are there resorts Disney has its own cruise line. This cruise line is a great idea because it is kid friendly. Most parents look for vacation spots that would be good for the whole family. Disney cruises are the answer. You can take your kids on vacation and do not have to worry about finding things for them to do.

Besides having theme parks and resorts Disney began merchandising in 1929. This started when a businessman was interested in placing the Mickey Mouse on the top of a children’s writing table. Now they have merchandise ranging from apparel, toys, home dÐ"©cor, books, foods, electronics, and many more. There are Disney Stores worldwide. There is a Publishing Company, Disney Press and Disney Editions.

Disney Family Museum was founded in 1955. It promotes education, writing, and scholarship funds. There is also a program called Disney Legends. This was established in 1987. The program acknowledges and honors individuals who have created the Disney magic. People who are legends are animators, imaginers, songwriters, actors, business leaders, or anyone who has made an impact on the Disney Legacy.

Disney’s Financial Health (2001-2005 evaluation):

Analyzing five-year revenues

Over the past five years, Disney has maintained a substantial growth rate in various financial areas given the many ups and downs of the economy. Despite any impending economic factors, Disney’s revenue has steadily increased over the past five years. Disney’s revenues are comprised of four major segments that bring in their income, which include: media networks, parks and resorts, studio entertainment, and consumer products.

Disney owns and operates three major media conglomerates consisting of ESPN, ABC, and DISNEY. Their media networks grossed over 4 billion dollars in the past five years. In 2001 the media networks brought in over 9.5 billion dollars and by 2005 revenue increased to over 13.2 billion dollars.

Disney’s theme parks and resorts had a slight differentiation in revenues from 2001 to 2003. Revenues declined from 7 billion in 2001, to 6.4 billion in 2002, and declined even more in 2003. By 2004 Disney financially bounced back by increasing their revenues from parks and resorts to 7.7 billion, and fully recovering by 2005 with 9 billion in revenue. We can attribute the decline in revenue to the September 11th terrorist attacks, which severely hindered travel and recreation. Families were fearful of traveling and with various terrorist threats, it limited their vacationing.

The third segment of revenue is from their motion picture industry, which is made up of MIRAMAX FILMS, BUENA VISTA ENTERTAINMENT, and WALT DISNEY PICTURES. From 2001 to 2004 their motion picture industry steadily rose from annual revenue of 6 billion in 2001, and by 2004 rose to 8.7 billion. In 2005 this segment saw a decrease in the revenue to 7.5 billion.

The final segment that makes up their revenue is consumer products, which consist of toys, apparel, footwear, video and computer games, and so forth. There was a slight loss in consumer product revenue, which can be attributed to lack of consumer spending. In 2005 the consumer product segment remained in their current declining trend at 2.1 billion.

The contribution from media networks, parks and resorts, studio entertainment, and consumer products totaled the company revenues in 2005 to 31.9 billion. This increased from 2001, which totaled 25.1 billion.

The overall operating income for Disney is as follows: in 2001 they grossed over 4 billion dollars, in 2002 operating income drastically decreased to 2.8 billion dollars, in 2003 the gradually increased to 3.1 billion dollars, in 2004 they continued increasing to 4.5 billion dollars, and in 2005 they slightly increased to 4.6 billion. (See figure 1.0 for graph).

Stock Trend Analysis/Analyst Opinion

Given the information in Figure 1.1 (see appendix), general conclusions can be drawn. Between now and the last three months, recent trends have not been to sell Disney stock, but to strongly buy and retain them. This shows that Disney’s financial health is strong due to high demand to retain and invest in the Disney Company. This table displays that the financial health of the company is likely to grow and keep their current trend of financial success.

According to an analyst opinion at the yahoo finance website, the media industry trend is to buy and hold onto media stocks. This is reflective of Disney’s stock rating of 2.1. When analyzing Disney’s corporate information, we came across the following statistics: Disney’s current ratio is 0.958 times (8845 billion/9168 billion), return on investment is 87.5 %( 4654 billion/ 53158 billion). As for analyzing the management effectiveness the Return on equity is 10.13% and the return on assets is 5.29%, there total debt over equity is 52.1%, and there operating cash flow is 4.69 Billion.

When comparing Disney to the industry averages, it is evident that Disney is financially established and successful. Their market capacity is 52.17 billion, which is significantly higher than the industry average of 40.87 billion; also there net income is 2.62 billion compared to the industry average of 1.76 billion (for further comparisons see figure 1.3 in the appendix). Basically Disney constitutes a large portion of the media industry, and their ongoing financial success is indicated through their contributing components of revenue, income, and growth.

Disney Stock Exchange (Two week period)

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