Even in the toughest of economic environments, there are industries and sectors that continue to perform well and even prosper in uncertain markets. The fact is that no matter how bad the economy may be, people need to eat, fuel their vehicles, and put clothes on their backs.
For many people, there is one area of their lives where they will continue to spend and even splurge – their children. Even as US families have been cutting back on spending, certain companies have been posting record profits due to their appeal to families and kids.
This has been evident in the last few years as companies such as The Walt Disney Company (DIS) has enjoyed continued revenue growth, even in light of low consumer spending and confidence, and is expected to continue that growth into the future.
Whether you have children or not, you are no doubt familiar with The Walt Disney Company and its broad range of entertainment products. This global company has had excellent revenue growth in the last year and has also benefited from strong branding and large market share, making it an excellent long-term investment candidate.
A Long-Term Investment Play In The Entertainment Sector
While the economic conditions have led to investors eschewing consumer-related plays, there are certain companies that have a loyal consumer base, and have continued to do well even in spite of the worst economic downturn in the US since the Great Depression.
One of these companies is The Walt Disney Company, which weathered the economic storm quite well – posting strong earnings over the last three years – and has benefited from the increase in the discretionary spending power of consumers in the US.
There are few companies and brands that are more ingrained in our culture than The Walt Disney Company. From movies, books, theme parks, cruises, and toys, Walt Disney certainly has permeated every corner of the children’s entertainment market.
For a long-term investment strategy, The Walt Disney Company could prove to be a valuable core entertainment sector holding as they continue to deliver results, and also boast a stable management team. The company as a whole also appears to be holding up well in light of the economic risks stemming from trouble overseas.
Disney Fundamentals Point To Long-Term Investment Growth
As a diversified worldwide entertainment company, Disney’s yearly net income increased in the fourth quarter to a record $4.8 billion, with EPS for the fourth quarter increasing from $0.45 in the prior year quarter to $0.59, beating analysts’ expectations of $0.54.
Led by the strength of the firms media networks which saw an increase of 9%, and resorts and parks which rose 11%, Disney total revenue rose 7% year-to-date. Top-line expansion was driven in the company’s media networks due to a strong performance by its Disney channels and ESPN in the way of affiliate revenue and higher advertising.
Disney also saw an increase in guest spending in its parks and resorts division, credited to an increase in ticket prices, modest increases in park attendance, and increased guest spending at the parks. Better performances from its Disney Cruise Lines, Disneyland Paris, and Hong Kong Disneyland Resort contributed significantly to the improvement in operating income.
Disney currently has a P/E of 14.0, which is slightly below the Broadcasting and Entertainment Industry’s P/E of 15.3, and below the Consumer Services Sector P/E of 23.5. Disney has a forward 12 month P/E of 12.2, and a three to five year EPS growth rate of 4.7%.
At its current price of $35.77, Disney is trading off of its 52 week high of $44.34, and has an analysts’ price target of $42, giving it a nice upside, with a 1.12% dividend while you wait. Consider adding The Walt Disney Company to your long-term investment portfolio in order to capitalize on this company’s long-term growth potential.