Question

DISNEY’S NUMBERS Use the following information on Disney to answer the case questions. Disney’s current stock...

DISNEY’S NUMBERS

Use the following information on Disney to answer the case questions. Disney’s current stock price is $113.00 per share. The average growth rate of the company’s dividend has been 16.09% from 2002 through 2017. Disney’s return on equity is 19.5% and the company retains approximately 75.7% of its profits while paying out the remaining 24.3% in dividends. The company’s stock currently trades at 16.27 times its current year earnings estimate of $6.96 per share. Analysts expect the company to earn $7.36 per share in 2019 and $8.24 in 2020. Disney’s peers engaged in movie making trade at 19.6 times their current year earnings estimates while peers in parks and resorts trade at 19.2; media and broadcasting at 17.0 and consumer products at 19.1.

What is Disney stock’s intrinsic value using the dividend discount model?

Homework Answers

Answer #1

Price = $113

growth =16.09%(2002-2017)

Dividend Payout Ratio = 24.30%

Return=19.50%

EPS=6.96 (Current Year)

P/E Ratio =16.27

EPS 2019=7.36

DPS 2019=1.78848

EPS 2020=8.24

DPS 2020=2.00232

Average of PE ratio of Competitors= 18.725 times

Therefore Intrinsic Value as per market value basis =18.725*6.96=130.326

Using the above price to get growth Rate as per DDM= D1/Re-g=130.326

=1.78848/(19.50-g)=130.326

We get G=13%

Now Intrinsic Value according to ddm= D1/(re-g)

where D1=1.788

g=13 as computed Above

r=19.50

we get Intrisic Value as per DDM=$138

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