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What Should Investors Know About The Walt Disney Company's (NYSE:DIS) Future?

Simply Wall St

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Looking at The Walt Disney Company's (NYSE:DIS) earnings update in December 2018, it seems that analyst expectations are fairly bearish, with earnings expected to grow by -2.0% in the upcoming year compared with the higher past 5-year average growth rate of 11%. With trailing-twelve-month net income at current levels of US$13b, we should see this rise to US$12b in 2020. Below is a brief commentary on the longer term outlook the market has for Walt Disney. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for Walt Disney

Can we expect Walt Disney to keep growing?

The longer term expectations from the 15 analysts of DIS is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

NYSE:DIS Past and Future Earnings, May 4th 2019
NYSE:DIS Past and Future Earnings, May 4th 2019

By 2022, DIS's earnings should reach US$14b, from current levels of US$13b, resulting in an annual growth rate of 6.8%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $6.84 in the final year of forecast compared to the current $8.4 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 21% to 16% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Walt Disney, I've compiled three relevant factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Valuation: What is Walt Disney worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Walt Disney is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Walt Disney? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.