Nicholas Ryan, Dan Pinargote, Elizabeth Iniguez, Eleanor Dillon, Avery Morales

Javine
FI 410-003
EQUITY ANALYSIS AND VALUATION / BLOOMBERG BUSINESSWEEK CASE STUDY
3 © Bloomberg L.P.

1) What is Disney stock’s intrinsic value using each of the four models? ◼
a) Constant Growth Model

E1 6.19
D1 $1.24
g 5.75%
K 6.90%
IV $107.65

b) Multi-Stage Growth Model

Projected Dividends IV CF total CF PV

D0 $1.76 $1.76 $1.76
D1 $1.65 $1.65 $1.54
D2 $1.85 $169.94 $171.78 $150.32
D3 $1.95 $153.63

Stock Price $153.63 > $140

c) Discounted Dividend Model

Projected Dividends PV
D0 $1.76 $1.76
D1 $1.65 $1.54
D2 $1.85 $1.62
Terminal Value 146.9853 $128.62
NPV $133.55 < 140 Overvalued

d) Market Multiples Approach

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 Weight of Disney
PE Revenue
Media P/E 25.5 0.365
Parks/Consumer P/E 21.9 0.411
Studio P/E 19.1 0.167
DTCI 14.1 0.057

Disney Multiple 22.3018

IV $147.19 Vs. 140

Undervalued

2)
Reconcile Disney stock’s intrinsic value, considering the strengths and weaknesses of
each valuation approach.

a) The constant growth model is not the ideal model for calculating Disney stock’s
intrinsic value because Disney’s dividend growth history is sporadic and
fluctuates frequently.
b) The multi-stage model is more complex and does not use past data. Additionally,
it is more accurate because it is easier to manipulate annual growth rates. It is an
accurate model for this case.
c) The dividend discount model has inaccuracies since it is limited to what the
company is willing to pay its investors in dividends. The company may be making
advancements in their industry while not 100% reflecting that in their dividend
payouts.
d) The multiple markets method does not require forecasted values, but it can
neglect the future circumstances of the company since it uses historical data.
This model has the best available information for this case.

3) After completing the Terminal Tutorial, attach a screenshot of the GP function screen
comparing Disney to the S&P 500 from August 1, 2018, to August 1, 2019. Describe in
one sentence if and how the comparison has changed from what was shown in the
video.
a) The chart shows that the S&P 500 (SPX Index) has relatively longer periods of
outperforming Disney (DIS US EQUITY), but in mid- April to the end of the year
SPX Index and DIS US EQUITY moved roughly together.

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 Memo
Bloomberg Case 2 focused on the Equity Valuation and Analysis of the Disney Company.

The group was tasked with declaring Disney as a company that is undervalued or overvalued by

utilizing the four models discussed in our Finance 410 class, Constant Growth Model, Multi-

Stage Growth Model, Discounted Dividend Model and the Market Multiples Approach. These

models would bring us to Disney stock’s intrinsic value(s) and would provide the answer to our

task.

Disney’s Dividend growth history was sporadic and fluctuated with no clear trend, thus

making the Constant Growth Model and its intrinsic value not ideal when considering the

company’s value. As for the Multi-Stage Model, it is an accurate model due to its easy

manipulation of annual growth rates and its complexity without relying on previous data. The

intrinsic value was $153.63, making it undervalued when compared to its original $140.00 value.

Next the Dividend Discount Model is also not ideal due to being limited to what the company is

willing to pay its investors in dividends, causing inaccuracies. Its intrinsic value should not be

considered for this reason. Finally, the Market Multiples Approach, it does not need forecasted

values, however it does have a tendency for neglecting future circumstances in the company. It

uses historical data and has the greatest available information for this particular case. The

Intrinsic value was found at $147.19, again making Disney undervalued when compared to its

previous $140.00 value.

The Multi-Stage Model and Market Multiples Approach were the most accurate models

for this case. Both Intrinsic values were found to make the Disney Company be undervalued.

This is because the Intrinsic Values in each model were greater than the previous stated value of

$140.00.

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