According to the 2020Q4 financial statement of DIS provided by Utradea, several basic financial indicators can be calculated as below:
Earnings per Share (EPS) = Net profit/Num of Shares = -710M/1.81B = -0.39
Return on Equity (ROE) = Net profit/Equity * 100% = -710M/201.55B = -0.35%
Price to Earnings Ratio (PE) = Price/EPS = 172.78 / (-0.39) = -443.02
Price to Book Ratio (PB) = Price/Book Value = 172.78/46.18 = 3.74
Dividend per Share (DPS) = Dividend/Num of Shares = 0 (No reported data for dividend)
It can be known that clearly, the company’s business is in a bad situation (currently unprofitable) which is most likely owing to the Covid-19 pandemic. The Candlestick chart of Walt Disney shows that the stock’s price dramatically dropped from approx. 140 to near 80 at the beginning of 2020 when the Covid-19 occurred. However, the price bounced soon and started to show a constant increase until now.
It is interesting to see that the stock price peaked during the pandemic at 183.5 which is largely higher than the price before the pandemic happened. According to the Walt Disney Company Filings, the company’s Debt to Equity Ratio is 60.1% which further indicates the risk. Moreover, if we check the historical data of PE ratio and PB ratio, we can see that the current PE percentile is 2.98% but the PB percentile is 99.37%. It means that the current stock buyer will afford the most expensive price while the economic situation is the worst.
However, as we all know, share prices reflect people’s expectations. People may believe Disney’s theme parks will be reopened one day in the near future. However, I tend to believe the situation is still not clear and this reopen may be much later. Disney+ may be another reason why the stock price reached its peak. Since social distancing and staying-at-home became the norm, Disney+ has exploded. According to CNBC, Disney+ jumped from 33.5 million subscribers in its second quarter to 57.5 million by its third-quarter in 2020. By the fourth quarter, the company said it surpassed 73.7 million subscribers. The future of Disney+ is indeed promising. When everything goes back to normal, Disney is still a good profitable company that worth people’s constant attention. However, since the stock price just hit the peak and started to fall, keep calm and observe further information may be a good idea for now.