Walt Disney Company (DIS)

Conclusion

Walt Disney runs three segments, Entertainment, Sports and Experiences. It produces film and television, streams through Disney+, Hulu and ESPN, and operates theme parks and resorts. At a price of 119.12 USD, the company has a market capitalisation of 205.7 billion USD and an enterprise value of 246.5 billion USD.

The verdict is fair. The P/E of 23.9x sits 8.0% above its historical median of 22.1x, while EV/EBITDA of 10.6x is at a discount of 32.9% to its ten-year median of 15.8x. The fair value band runs from 86.21 to 129.31 USD with a midpoint of 107.76 USD, a margin of safety of -9.5% at the current price. The DCF gives 55.38 USD per share, and the fair value from historical multiples is 160.13 USD. The reverse DCF implies growth of 17.4% a year, against revenue growth of 7.6% a year over five years and free cash flow per share growth of 22.9% a year over the same period.

What holds the case up is cash generation: free cash flow conversion is 96.4% on a trailing basis, the Piotroski score is 8 of 9, and the company beat earnings estimates in all eight of the last quarters. The weakest numbers are the current ratio of 0.71, the return on invested capital of 11.7% against a WACC of 10.7%, and the Altman Z-score of 2.56, which sits in the grey zone. The gap between the DCF and the price means the outcome depends heavily on the growth assumed.

Financial health

Financial health is yellow: net debt to EBITDA of 1.76x and interest coverage of 10.3x hold it up, while a current ratio of 0.71 pulls it down. The quick ratio is 0.56 and debt to equity is 0.42, both as of 2026-06-30. The Altman Z-score is 2.56, in the grey zone. The Altman model was designed for manufacturers, and Disney is not one, so this reading is only indicative. Insolvency risk: low, about 0.08% by the estimate of the Ohlson model over one to two years. Current liabilities exceed current assets by a wide margin, so the company relies on steady operating cash flow to meet short-term obligations.

Earnings quality

Earnings quality is green, held up by strong cash conversion, a high Piotroski score and an unlikely Beneish reading. Free cash flow conversion is 96.4% on a trailing basis and 106.9% over five years. The accrual ratio is -2.9%, meaning reported earnings are backed by cash. Stock-based compensation is 1.5% of revenue, and free cash flow after it is 6.77 billion USD. The share count has grown at a compound 0.03% a year over five years, so buybacks have not reduced it. The Piotroski score is 8 of 9, and the Beneish M-score of -2.61 points to an unlikely manipulator. Earnings beat estimates in all eight of the last quarters, with an average surprise of 10.4%. Analysts have cut next-year estimates more often than they raised them: six downgrades against three upgrades in the last 30 days.

Profitability

Profitability is green, with margins at or above their historical medians. The operating margin is 16.0% against a median of 13.8%, and the gross margin is 37.6% against a median of 36.8%. The net margin is 8.7%, below its median of 9.3%. Return on invested capital is 11.7% against a WACC of 10.7%, a return above the cost of capital of 1.0 percentage point, labelled neutral. The five-year median ROIC is only 5.0%, so the recent improvement is recent. The DuPont split shows a net margin of 13.1%, an asset turnover of 0.48 and an equity multiplier of 1.80, so return on equity of 7.8% is not inflated by leverage. The low equity return is driven by a modest asset turnover rather than debt.

Growth

Growth is green, based on strong earnings growth and consistent revenue increases. Earnings per share compounded at 58.5% over three years but only 3.4% over ten years, so the recent figure reflects a rebound from a low base. Revenue compounded at 4.5% over three years, 7.6% over five years and 6.1% over ten years. Revenue grew in eight of the last ten comparable years. Free cash flow per share compounded at 112.0% over three years, 22.9% over five years and 3.7% over ten years. Analysts expect next-year earnings growth of 8.1%, but the three-year revenue rate of 4.5% is the slowest of the three windows.

Valuation

Valuation is yellow, with the verdict fair and a margin of safety of -9.5%. The P/E of 23.9x sits 8.0% above its historical median of 22.1x. EV/EBITDA is at a discount of 32.9% to its ten-year median, and the price-to-book ratio is at a discount of 32.3%. The DCF gives 55.38 USD per share at a discount rate of 12.0%, with 44.3% of the value coming from the terminal value. The fair value band runs from 86.21 to 129.31 USD and rests on fixed assumptions such as a 5% equity risk premium and capped growth, so it is an order of magnitude, not a price target. The dividend yield is 0.9%, the forward yield 1.3%, and the payout is 21.7% of free cash flow.

Risks

The current ratio of 0.71 is the most immediate weakness: current liabilities are larger than current assets, so any fall in operating cash would tighten liquidity. The return on invested capital of 11.7% only just exceeds the WACC of 10.7%, so a rise in the cost of capital or a fall in returns would remove the spread. The Altman Z-score of 2.56 leaves limited room, though the Ohlson estimate of insolvency risk stays low. The DCF of 55.38 USD sits far below the price, so the valuation depends on whether growth above the five-year revenue rate materialises. The net margin of 8.7% is below its median, and analysts have been cutting estimates. This analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the mix of profit across the three segments cannot be assessed.