Walt Disney Company (The) (NYSE: DIS) – Are Walt Disney Shares Overvalued Or Undervalued?

Walt disney co Stocks (NYSE: DIS) have lagged the S&P 500 in 2021, generating a loss of 18.5% year-to-date.

Disney shares have been on a wild ride in recent years, but investors may be wondering if Disney shares have any value after the recent pullback.

Earnings: A price-to-earnings (PE) ratio is one of the most basic fundamental measures to assess the value of a stock. The lower the PE, the higher the value.

For comparison, the S&P 500 PE is currently around 29.4, almost double its long-term average of 15.9. Disney’s PE is 133.9, about 4.5 times the average for the S&P 500 as a whole.

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Growth: Looking ahead to the next four quarters, the S&P 500 futures PE ratio looks much more reasonable at just 20.8. Disney’s 36.1 futures earnings multiple still more than 50% higher than the S&P 500, making Disney seem overrated.

Disney’s futures PE ratio is also more than 50% higher than the average multiple of its peers in the communications services industry, which average a futures earnings multiple of 21.5.

However, when it comes to valuing a stock, profits aren’t everything.

Growth rate is also critical for businesses that build their bottom line quickly. The price / earnings / growth ratio (PEG) is a good way to incorporate growth rates into the valuation process.

The overall PEG of the S&P 500 is currently around 1.0; Disney’s PEG is 3.14, which suggests that Disney is still extremely overvalued after taking growth into account.

The price-to-sales ratio is another important valuation metric, especially for unprofitable companies and growth stocks. The S&P 500’s SP ratio is currently 3.19, well above its long-term average of 1.63. Disney’s PS ratio is 4.03, well above the average for the S&P 500 as a whole.

Disney’s PS ratio is also up 37.1% over the past five years, suggesting the share price is at the high end of its historic valuation range.

Finally, Wall Street analysts see the value of Disney shares over the next 12 months. The average analyst price target among the 27 analysts covering Disney is $ 201, which suggests a 36.2% increase from current levels.

The verdict: At its current price, Disney stock appears to be overvalued based on a sample of common fundamental valuation metrics.

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