W20097

THE WALT DISNEY COMPANY’S STOCK: BUY, HOLD, OR SELL? 1

Shuran (Freya) Yang wrote this case under the supervision of Stephen Foerster solely to provide material for class discussion. The
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Copyright © 2020, Ivey Business School Foundation Version: 2020-10-16

On November 7, 2019, Antonia Crowley, a portfolio manager at Century 23 Investment Company, was
reviewing the recently released fourth quarter and full fiscal year earnings report of The Walt Disney
Company (Disney). She was closely monitoring Disney’s stock, since it was one of the major holdings of
Century 23 Global Fund. Crowley was known for her strong leadership of a team of analysts, and the fund
had achieved a consistently strong performance in the past, outperforming the benchmark MSCI World Index.

The fund’s strategy was to identify stocks that were showing consistent earnings growth above broad market
levels while also trading at a reasonable price, a strategy known as growth at a reasonable price (GARP),
popularized by well-known Fidelity Investments Inc. fund manager, Peter Lynch, and combining elements
of growth and value investing strategies. According to Lynch, a firm’s price-to-earnings (P/E) ratio,
calculated as the stock price divided by the earnings per share, should roughly equate expected earnings
growth (G). 2 For example, if a company had a P/E ratio of 15 and an expected earnings growth of 15 per
cent, its PEG ratio would be 1.0, calculated as P/E divided by G. Promising GARP candidates tended to be
those with PEG ratios below 1.0.

As a leading company in the entertainment industry, Disney, together with its subsidiaries, was involved in
various businesses, including movie production, streaming, and parks and resorts development. On the
movie front, Disney’s 2019 blockbuster Avengers: Endgame became the all-time highest-grossing film,
with a worldwide box office gross of over US$2.8 billion. 3 The new Star Wars-themed park, Star Wars:
Galaxy’s Edge, opened on May 31, 2019 at Disneyland in Anaheim, California. 4 The Disney+ streaming
service, launching on November 12, 2019, was set to take on pioneering streaming service Netflix Inc.
(Netflix) by featuring thousands of movies and television (TV) series from Disney, Pixar Animation Studios
(Pixar), Marvel Studios LLC. (Marvel), Star Wars Studio, and others. 5

Disney’s stock had delivered a relatively strong performance in the last three years, outperforming media
conglomerates Viacom Inc. (Viacom) and Comcast Corporation (Comcast), although underperforming
Netflix. Crowley expected intense market competition to continue in the entertainment industry,
particularly in the streaming services area. With a major holding in the fund, Crowley and her team had
been closely monitoring Disney’s stock performance and were impressed by Disney’s growth to date.
However, Crowley felt it was time to update her investment thesis on the stock. What long-term trends were
expected to play out in the industry? In the short-term, what success or failures might Netflix challengers
face in streaming services? Were current global economic conditions a concern? Could an analysis of recent

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financial performance coupled with expectations of future performance provide any clues as to the
suitability of current investments? Ultimately, she needed to know whether the Century 23 Global Fund
should hold its current position in Disney’s stock, buy more, or sell. Were there better options to consider,
such as buying stocks from Disney’s competitors?

THE ENTERTAINMENT INDUSTRY

The media and entertainment (M&E) industry consisted of film, radio, print, and TV. Its segments included
movies, TV shows, radio shows, news, music, newspapers, magazines, and books. The US media and
entertainment industry recently contributed more than $717 billion annually to the economy, which
represented one-third of the global gross amount of this industry. 6 Revenues from the global M&E industry
were expected to grow steadily at 4.3 per cent annually, to reach approximately $2.3 trillion in 2020. 7

The industry was embracing new opportunities in adapting fifth-generation (5G) wireless technology.
Meanwhile, more familiar themes, including video streaming, personalized content, and data privacy and
protection, continued to change the industry landscape. 8

The industry was also being reshaped by mergers and acquisitions (M&A), particularly as large firms
attempted to strengthen their market power by controlling a greater portion of TV series and films. In
August 2019, Viacom and CBS Corporation (CBS) entered into a definitive agreement to combine in an
all-stock merger, creating a company with more than $28 billion in revenue. 9 In March 2019, Disney
acquired Twenty-First Century Fox, Inc. (renamed TFCF Corporation) through a $71 billion acquisition,
which enabled Disney to accelerate its direct-to-consumer strategy and expand its global presence. 10 The
aggressive M&A deals and strategic repositioning were expected to contribute to changing consumer
streaming behaviours, and were intended in part to build stronger brand loyalty.

Media Networks

The media networks segment included cable and broadcast TV networks, TV production and distribution
operations, domestic TV stations, and radio networks and stations.

Since its invention in the early 1900s, TV had played a vital role in family life. However, in recent years,
consumers were shifting away from viewing traditional network and cable TV, instead embracing the
expanding opportunities to enjoy media experiences tailored to their personal preferences, schedules, and
contexts. 11 Facing a decline in their traditional business, TV subscription providers offered services such
as pared-down bundles, advanced set-top boxes, and delivery of 4K TV quality.

In the United States, TV subscription revenue was expected to fall by 2.9 per cent annually to $81.8 billion
by 2023, 12 in contrast to the ongoing rise of video streaming. New competitors were challenging the
historically strong players, as even publicly funded broadcasters had proven unable to achieve a significant
increase in income under pressure from leading streaming companies such as Netflix and Amazon Inc. 13
The rise of streaming companies stimulated the investment in, and consumption of, quality original content
such as original series and films. Global revenue from the video streaming sector was forecast to increase
4.2 per cent annually to $28.2 billion by 2023, which would account for 16 per cent of the digital media
market. 14 The number of users in the subscription video on demand segment was estimated to grow by 5
per cent annually to 1.3 billion by 2023. 15

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Parks and Resorts

Amusement parks featured various attractions, including rides, games, and other events to serve
entertainment purposes. The parks were usually structured around certain themes. With the explosion of
the experience economy, particularly driven by millennials, the spending on theme parks had recently been
increasing at an annual rate of 5 per cent globally to $44.8 billion. According to a 2014 research report
about the experience economy, 78 per cent of millennials chose to spend money on desirable experiences
or events over buying desirable physical objects. 16

Recent worldwide park attendance was 1.1 billion and was expected to grow at an annual rate of 3.8 per
cent through 2022. 17 As a result, many theme parks and resorts were being built or renovated worldwide.
Universal Beijing Resort was one such theme park project, partly owned by Universal Parks & Resorts
(Universal), a business unit of Comcast NBCUniversal Media, LLC. It was intended to feature several all-
new attractions, along with the best Universal rides and specially created experiences designed to reflect
China’s cultural heritage. 18 The resort was expected to be the largest theme park development in the world
at the time of its opening, in 2021. Also, Hong Kong Disneyland Resort was expanding to add new themed
areas, including Disney’s highly popular Frozen Ever After as well as Marvel Super Hero Island. The resort
recently debuted a new stage show based on Disney’s popular animated musical adventure film Moana,
called Moana: A Homecoming Celebration.

An increasing number of theme parks and resorts were dedicated to providing highly immersive
environments that integrated intellectual property, sophisticated storylines, and cutting-edge technology
such as Internet of Things and virtual reality.

Studio Entertainment

The global film industry had experienced steady growth over recent years. Industry revenue grew 3.8 per
cent in 2019 to $103 billion. 19 Owing to numerous blockbusters that galvanized the global box office and
led to fierce competition, global box office revenue was forecast to increase at an annual rate of 9 per cent
in 2020, 20 although it was challenging to predict hit movies.

The innovative film production industry encouraged creative filmmakers to utilize new technology, such
as the full frame look and 4K+, which provided audiences with brand new cinematic experiences.
Distribution within the industry had gradually shifted from physical distribution through tape reels to digital
distribution. As distribution became simpler and more affordable, an increasing number of independent
filmmakers entered the industry, particularly over the previous five years. 21

The black and white film Roma, financed by Netflix, was released in 2019 and gained recognition from the
Golden Globe Awards and the British Academy of Film and Television Arts awards. It was also nominated
for the Academy Award for Best Picture that year. The success of Roma intensified arguments about the
definition and boundary of film production. 22 Online streaming services were engaged in a fierce battle
with the traditional film industry, with the trend of financing original streaming films led by Netflix.

Moreover, the film industry was evolving and reflecting more diversity, which enabled more women and
people of colour to portray lead characters in positions of power. Wonder Woman, featuring one of the first
female superhero protagonists, and Black Panther, a milestone African American film, were both recent
Hollywood mega-budget films with huge box office success.

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THE WALT DISNEY COMPANY

The Walt Disney Company was founded by Walt Disney and his brother, Roy O. Disney, in 1923 as the
Disney Brothers Cartoon Studio. According to its mission statement, the company was dedicated to
“entertain, inform and inspire people around the globe through the power of unparalleled storytelling,
reflecting the iconic brands, creative minds and innovative technologies that make ours the world’s premier
entertainment company.” 23 As a leading diversified international family entertainment and media
enterprise, Disney mainly operated in four business segments: media networks, parks and resorts, studio
entertainment, and consumer products and interactive media.

From humble beginnings, Walt subsequently continued his legendary work of creating world-class stories
and experiences. Some highlights along the way included Steamboat Willie, the first animated film to star
Mickey Mouse and to feature synchronized sound, Flower and Trees, Disney’s first full-colour cartoon and
first Academy Awards winner for Cartoon Short Subject, and Snow White and the Seven Dwarfs, Disney’s
first feature-length animated film. 24

In 1955, Disneyland Resort in Anaheim came to fruition as Walt’s first theme park, growing into one of the
most popular providers of family travel and leisure experiences. Creating a unique destination built around
the original storyline and immersive experience, Disneyland Resort ushered a new era of family
entertainment. In 1971, Walt Disney World Resort opened in Lake Buena Vista, Florida.

Disney’s stock had been traded publicly since 1957, with its initial public offering (IPO) at $13.88 per
share. Given the numerous stock splits over the years (approximately 401 to 1), 25 the current stock price of
$131.27 was equivalent to $52,647, relative to the original IPO price. In the fiscal year ending September
30, 2019, Disney generated total revenue of $69.6 billion, up from $59.4 billion in 2018, for an increase of
17 per cent. 26 Diluted earnings per share (EPS) attributable to Disney decreased from $8.36 to $6.64. 27

The reduction in EPS was attributable to a number of factors across various segments. Operating income
declined in the direct-to-consumer and international and studio entertainment segments, and was partially
offset due to higher results with the parks, experiences and products, and media networks segments. Media
networks achieved $24.8 billion in revenue in 2019 (or 36 per cent of total revenue) and $7.5 billion in
operating income (or 50 per cent of total operating income). 28 Parks and resorts reported $26.2 billion in
revenue (or 38 per cent of total revenue) and $6.8 billion in operating profits (or 45 per cent of total
operating income), resulting from growth with domestic theme parks and resorts and merchandise
licensing. 29 Studio entertainment had $11.1 billion in revenue (or 16 per cent of total revenue) and $2.7
billion in operating income (or 18 per cent of total operating income). The year-over-year decline in this
segment’s operating income was primarily due to the consolidation of TFCF as well as the loss from
theatrical distribution and film cost impairments of TFCF operations. 30 Direct-to-consumer and
international revenue was $9.3 billion (or 13 per cent of total revenue), almost three times greater than the
previous year, while operating income was –$1.8 billion, owing to the consolidation of video streaming
service Hulu, ongoing investment in the sports streaming service ESPN+, and the cost of supporting the
launch of the new video streaming service Disney+. 31

Disney was launching its direct-to-consumer streaming platform Disney+ on November 12, 2019. It
included series and films from Disney, Pixar, Marvel, Star Wars Studio, National Geographic, and TFCF.
Disney intended to go head-to-head with the leading companies in the streaming market—in particular,
Netflix. It had recently banned Netflix from advertising across its entertainment TV network, which was an
unusual move. 32 The subscription cost of Disney+ at the time of launch was $6.99 per month, or $69.99 per
year, compared with a $9 per month plan from Netflix. 33

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THE COMPETITORS

Crowley identified three main competitors of Disney: Netflix, Viacom, and Comcast. She planned to use
these firms in her comparable analysis.

Netflix

Netflix was started in 1997 as a rental service for digital video discs (DVD) using regular mail, and grew
to become a global leading Internet entertainment service provider, with paid membership in over 190
countries. 34 Paying members were able to watch its TV series, documentaries, and featured films across a
wide variety of genres and languages on Internet-connected screens, and without commercials. 35 Launching
its streaming service in 2007, Netflix was a pioneer in Internet delivery of video entertainment. 36 It
identified the potential of streaming technology and began to transform into a subscription video on demand
business model. 37 The annual revenue of Netflix had grown from $1.36 billion to about $18.9 billion in 11
years. 38 Following a similar trend, the number of Netflix paying subscribers increased from less than 22
million in 2011 to approximately 150 million in 2019.39 The United States continued to serve as its largest
market, with over 60 million paying streaming subscribers in 2018, 40 which accounted for 77 per cent of
the video on demand industry in the United States. 41

Netflix operated mainly in three segments: domestic streaming, international streaming, and domestic
DVDs. The streaming services derived revenue from monthly membership fees from subscribed
members. 42 Domestic and international streaming together generated $15.4 billion in revenue in 2018,
which accounted for 97.8 per cent of Netflix’s total revenue. 43

According to forecasts by Netflix, over the following decades, linear TV (real-time broadcast scheduled
TV) would gradually be replaced by Internet entertainment. Netflix hoped to continue to lead by providing
top entertainment experiences to subscribers. 44

Viacom

Viacom was one of the largest media conglomerates worldwide and was committed to creating
“entertainment experiences that drive conversation and culture around the world.” 45 It connected with
diverse audiences through TV, film, digital media, live events, merchandise, and business solutions. 46
Viacom mainly operated in two sectors: media networks and filmed entertainment. 47

In the media networks segment, Viacom created, acquired and distributed entertainment content, service,
and related branded products through cable satellite and broadband services worldwide. 48 Under its
advanced marketing solutions portfolio, the segment also delivered advertising services and licensed its
brands and properties. 49 The media networks segment attracted approximately 4.4 billion TV subscribers
in over 180 countries and 46 languages by 2018. 50 The segment generated around $10 billion in revenue
and $3.13 billion in operating profits before tax, which accounted for 76.7 per cent of total revenue, and it
was also the only profitable sector across the company. 51

Powered by the iconic Paramount Picture Corporation, the filmed entertainment segment produced,
developed, financed, acquired, and distributed films, TV programming, and other entertainment content
through various divisions including Paramount Pictures, Paramount Players, Paramount Animation, and
Paramount Television, across various markets and media worldwide. 52 It generated $3 billion in revenue in

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2018 and accounted for 23.3 per cent in total revenue. However, the segment generated a $39 million loss
in terms of operating profit before tax.

Viacom was also dedicated to utilizing cutting-edge technology to explore the possible future of the
entertainment business. In 2019, Viacom signed a deal to partner with ACCESS Co., Ltd., an Internet
technology company from Japan, to make Viacom’s TV brands accessible in vehicles through the ACCESS
Twine4Car system in Germany. 53 The service would integrate 5G technology and was anticipated to usher
in new eras of in-car entertainment and linear TV network distribution. 54

On August 13, 2019, CBS and Viacom agreed to merge through a stock swap, thereby creating a combined
entity with over $28 billion in revenue. 55 The combined ViacomCBS Inc. would have the largest US TV
viewership share, with 22 per cent compared to 18 per cent for Comcast and 14 per cent each for Disney
and for Fox Entertainment Group. The deal was an important milestone for the Redstone family, including
Shari Redstone, daughter of ailing media mogul Sumner Redstone. In 2006, the private firm National
Amusements, Inc. spun out both Viacom and CBS, and Shari Redstone sought to reunite the firms beginning
in 2016. 56 At the time of the spinoff, Viacom was seen as a firm with huge growth potential, owning popular
brands such as Nickelodeon and MTV, but its market capitalization had dropped from $26 billion to $12
billion; it was dwarfed by both Comcast, valued around $400 billion, and AT&T Inc. (the parent of Warner
Brothers), valued around $250 billion. 57 As media converged and the traditional TV audience declined
through “cord-cutting,” Shari Redstone sought to recombine the two entities to achieve synergy, but initially
faced resistance from the chief executive officer of CBS, Les Moonves, who was ousted in 2018 due to
allegations of sexual misconduct. 58 With an expected market capitalization of around $30 billion, some
analysts viewed the combined entity as still too small to effectively compete with the larger players. 59 The
deal was completed on December 4, 2019.

Comcast

Founded by Ralph Roberts in 1963, Comcast was a global media and technology company that operated
through the business segments of cable communication, cable networks, broadcast TV, filmed
entertainment, themed parks, and British media and telecommunications conglomerate Sky Limited
(Sky). 60 The United States was the largest market for Comcast, with 87 per cent of its revenue generated in
the United States in 2018. 61

Cable communications was its largest sector, which accounted for 57 per cent of revenue and 69 per cent of
earnings before interest, taxes, depreciation, and amortization in 2018. 62 Cable communications consisted of the
operations of Comcast Cable Communication LLC (under the trade name Xfinity), which was one of the largest
providers of high-speed Internet, video, voice, and security and automation services to residential and business
customers. 63 By the middle of 2019, Xfinity had 22 million video subscribers in the United States, with a
continuous slight decline in the number of subscribers over the previous three years. 64

The cable networks, broadcast TV, filmed entertainment, and parks segments generated 25 per cent of
Comcast’s total revenue in 2018. 65 These segments were all under NBCUniversal Media LLC.
(NBCUniversal), which was acquired by Comcast in 2013. 66 After the acquisition, Comcast enriched its media
properties, which included broadcast networks, cable networks, movie studios, and theme parks owned by
NBCUniversal. The theme park business—Universal Parks & Resorts in Orlando, Florida; Hollywood,
California; and Osaka, Japan—reported $35.8 billion in revenue and an increase of 9 per cent in 2018. 67

Sky was one of the leading entertainment companies in Europe. 68 It provided direct-to-consumer businesses,
including videos, high-speed Internet, the Sky News broadcast network, and the Sky Sports network. 69 Sky
generated $4.6 billion in revenue in 2018, which accounted for 5 per cent of the company’s overall revenue. 70

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ECONOMIC CONDITIONS

The US economy had recovered from the financial crisis of 2008–09. 71 Real gross domestic product (GDP)
had grown at a relatively robust average annual growth rate of 3.39 per cent over the previous decade. 72
While economic growth slowed in recent years, the likelihood of a recession occurring in 2020 was still
quite low. According to a model developed by Bloomberg, the chances of a recession occurring in 2020
were estimated at 26 per cent. Economic concerns included the persistent trade war and tariffs with China
and decreased corporate investment, but these were balanced by a robust labour market with low rates of
unemployment. 73 The inflation rate was steady over the previous three years and was predicted to remain
at approximately 2.2 per cent per year over the next five years, around the US Federal Reserve System’s
target rate of 2 per cent. 74 The 10-year Treasury rate had fluctuated between 1.4 per cent and 3.2 per cent
over the previous three years, with a downtrend since the end of 2018, and was currently around 1.92 per
cent. 75 The 1-year Treasury rate had increased from 0.15 per cent at the beginning of 2015 to 2.70 per cent
at the end of 2018, then declined to the current rate of 1.58 per cent. 76 After a period of inversion between
May and October of 2019, the yield curve—as measured the difference between the 10-year and 3-month
Treasury yields—was once again sloping upward. 77

Global economic activity had been substantially affected over the last few years as trade and geopolitical
tensions had increased uncertainty about the future of the global trading system and international co-
operation. 78 The real GDP of China had shown remarkable growth over the previous few years. Although
economic growth had been moderate in the previous decade, China had experienced an average 6.9 per cent
annual growth in GDP over the previous five years. 79 China had become one of the world’s leading
countries, with the second-largest GDP (after the United States). 80 It was projected that China would
accelerate opening up its economy to benefit more fully from international trade and foreign investment. 81
Under the pressures of trade wars and Brexit, the European Union had generated a 1.1 per cent real GDP
growth and a 1.2 per cent inflation rate in 2019. 82 On November 7, 2019, the European Commission
announced a cut in eurozone growth targets, expecting a 1.2 per cent GDP growth in both 2020 and 2021
and a steady inflation rate of about 1.3 per cent. 83

BUY, HOLD, OR SELL?

Crowley and her team had collected comprehensive financial information about Disney and its peer
companies—including the latest balance sheets (see Exhibits 1 and 2), income statements (see Exhibits 3
and 4), cash flow statements (see Exhibit 5), related financial ratios (see Exhibits 6 and 7), and comparative
valuation metrics (see Exhibit 8). Crowley’s team had also adopted a forward-looking approach by
examining analysts’ expectations of the future performances of companies (see Exhibit 9). She first wanted
to understand what connection, if any, there was between key financial metrics and the stock performance
of these companies over the past several years see (see Exhibit 10). She then wanted to examine how the
companies’ stocks were currently priced relative to analysts’ expectations, while also considering the fund’s
strategy of identifying and investing in prosperous growth companies with reasonable stock prices.

Buried by the reports and statistics, Crowley was deep in thought, while staring at the green plants in her
office. To what extent did past financial performance correlate with the stock price performance? What was
the outlook and future prospects for these companies compared with consensus forecasts? Was there any
further analysis to be undertaken? Should Century 23 Global Fund buy more Disney stock, hold its current
position, or sell and invest elsewhere?

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EXHIBIT 1: BALANCE SHEETS

(in US$ Million)

Disney Netflix Comcast Viacom

Sep-30-2017 Sep-29-2018 Sep-28-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Sep-30-2017 Sep-30-2018 Sep-30-2019
ASSETS
Cash & Short-term Investments 4,017.0 4,150.0 5,418.0 2,822.8 3,794.5 4,435.0 3,428.0 3,814.0 3,507.0 1,389.0 1,557.0 760.0
Accounts Receivables 8,633.0 9,334.0 15,481.0 — — 466.2 8,834.0 11,104.0 10,684.0 3,456.0 3,144.0 3,717.0
Inventory 2,651.0 2,706.0 6,246.0 — — — - - - 919.0 896.0 775.0
Prepaid Exp. and Other Current Assets 588.0 635.0 979.0 4,847.2 5,899.7 426.6 4,081.0 6,930.0 8,132.0 523.0 482.0 460.0
Total Current Assets 15,889.0 16,825.0 28,124.0 7, 670.0 9, 694.1 5, 327.8 16,343.0 21, 848.0 22,323.0 6, 287.0 6, 079.0 5, 712.0

Gross Property, Plant, & Equipment 57,443.0 60,304.0 64,018.0 641.2 786.8 1,915.6 88,386.0 95,743.0 103,784.0 2,973.0 3,013.0 3,071.0
Less Accumulated Depreciation (29,037.0) (30,764.0) (32,415.0) (321.8) (368.5) (402.6) (49,916.0) (51,306.0) (52,983.0) (1,995.0) (2,094.0) (2,149.0)
Net Property, Plant, & Equipment 28,406.0 29,540.0 31,603.0 319. 4 418. 3 1, 513.0 38,470.0 44, 437.0 50,801.0 978. 0 919. 0 922. 0
Long-term Investments 3,202.0 2,899.0 3,224.0 - - - 6,931.0 7,883.0 7,473.0 - 410.0 496.0
Goodwill and Other Intangibles 38,421.0 38,081.0 103,508.0 10,371.1 14,961.0 14,588.6 114,277.0 163,877.0 161,442.0 11,978.0 11,922.0 12,211.0
Other Long-Term Assets 9,871.0 11,253.0 27,525.0 652.3 901.0 9,512.3 11,441.0 13,639.0 14,335.0 4,455.0 4,453.0 4,330.0
Total Assets 95,789.0 98,598.0 193,984.0 19, 012.8 25,974.4 30,941.7 187,462.0 251,684.0 256,374.0 23,698.0 23,783.0 23,671.0

LIABILITIES
Accounts Payable 6,305.0 6,503.0 17,942.0 359.6 563.0 444.1 6,908.0 8,494.0 10,198.0 431.0 433.0 482.0
Accrued Expenses 1,819.0 2,189.0 - 315.1 477.4 876.8 6,620.0 10,721.0 9,497.0 869.0 848.0 927.0
Other Current Liabilities 8,699.0 8,163.0 8,237.0 4,791.7 5,446.9 5,937.0 8,465.0 8,388.0 6,294.0 2,453.0 2,773.0 2,415.0
Total Current Liabilities 16,823.0 16,855.0 26,179.0 5, 466.3 6, 487.3 7, 257.9 21,993.0 27, 603.0 25,989.0 3, 753.0 4, 054.0 3, 824.0

Interest Bearing Debt 21,891.0 18,089.0 43,471.0 6,499.4 10,360.1 12,425.7 59,422.0 106,899.0 99,847.0 11,100.0 9,515.0 8,640.0
Other Non-Current Liabilities 10,923.0 9,699.0 21,482.0 3,465.0 3,888.3 4,396.6 35,231.0 43,364.0 50,010.0 2,478.0 2,503.0 2,446.0
Total Liabilities 49,637.0 44,643.0 91,132.0 15, 430.8 20,735.6 24,080.2 116,646.0 177,866.0 175,846.0 17,331.0 16,072.0 14,910.0

Total Common Equity 41,315.0 48,773.0 88,877.0 3, 582.0 5, 238.8 6, 861.5 68,616.0 71, 613.0 78,144.0 6, 035.0 7, 407.0 8, 454.0

Minority Interest 4,837.0 5,182.0 13,975.0 2,200.0 2,205.0 2,384.0 332.0 304.0 307.0

Total Equity 46,152.0 53,955.0 102,852.0 3, 582.0 5, 238.8 6, 861.5 70,816.0 73, 818.0 80,528.0 6, 367.0 7, 711.0 8, 761.0

Total Liabilities And Equity 95,789.0 98,598.0 193,984.0 19, 012.7 25,974.4 30,941.7 187,462.0 251,684.0 256,374.0 23,698.0 23,783.0 23,671.0

Note: Exp. = expenses

Source: Created by the case writers using data from S&P Capital IQ.

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EXHIBIT 2: COMMON SIZE BALANCE SHEETS

(in % of Assets)

Disney Netflix Comcast Viacom

Sep-30-2017 Sep-29-2018 Sep-28-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Sep-30-2017 Sep-30-2018 Sep-30-2019
ASSETS
Cash & Short-term Investments 4.2% 4.2% 2.8% 14.8% 14.6% 14.3% 1.8% 1.5% 1.4% 5.9% 6.5% 3.2%
Accounts Receivables 9.0% 9.5% 8.0% - - 1.5% 4.7% 4.4% 4.2% 14.6% 13.2% 15.7%
Inventory 2.8% 2.7% 3.2% - - - - - - 3.9% 3.8% 3.3%
Prepaid Exp. and Other Current Assets 0.6% 0.6% 0.5% 25.5% 22.7% 1.4% 2.2% 2.8% 3.2% 2.2% 2.0% 1.9%
Total Current Assets 16.6% 17.1% 14.5% 40.3% 37.3% 17.2% 8.7% 8.7% 8.7% 26.5% 25.6% 24.1%

Gross Property, Plant, & Equipment 60.0% 61.2% 33.0% 3.4% 3.0% 6.2% 47.1% 38.0% 40.5% 12.5% 12.7% 13.0%
Less Accumulated Depreciation (30.3%) (31.2%) (16.7%) (1.7%) (1.4%) (1.3%) (26.6%) (20.4%) (20.7%) (8.4%) (8.8%) (9.1%)
Net Property, Plant, & Equipment 29.7% 30.0% 16.3% 1.7% 1.6% 4.9% 20.5% 17.7% 19.8% 4.1% 3.9% 3.9%
Long-term Investments 3.3% 2.9% 1.7% - - - 3.7% 3.1% 2.9% - 1.7% 2.1%
Goodwill and Other Intangibles 40.1% 38.6% 53.4% 54.5% 57.6% 47.1% 61.0% 65.1% 63.0% 50.5% 50.1% 51.6%
Other Long-Term Assets 10.3% 11.4% 14.2% 3.4% 3.5% 30.7% 6.1% 5.4% 5.6% 18.8% 18.7% 18.3%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

LIABILITIES
Accounts Payable 6.6% 6.6% 9.2% 1.9% 2.2% 1.4% 3.7% 3.4% 4.0% 1.8% 1.8% 2.0%
Accrued Expenses 1.9% 2.2% - 1.7% 1.8% 2.8% 3.5% 4.3% 3.7% 3.7% 3.6% 3.9%
Other Current Liabilities 9.1% 8.3% 4.2% 25.2% 21.0% 19.2% 4.5% 3.3% 2.5% 10.4% 11.7% 10.2%
Total Current Liabilities 17.6% 17.1% 13.5% 28.8% 25.0% 23.5% 11.7% 11.0% 10.1% 15.8% 17.0% 16.2%

Interest Bearing Debt 22.9% 18.3% 22.4% 34.2% 39.9% 40.2% 31.7% 42.5% 38.9% 46.8% 40.0% 36.5%
Other Non-Current Liabilities 11.4% 9.8% 11.1% 18.2% 15.0% 14.2% 18.8% 17.2% 19.5% 10.5% 10.5% 10.3%
Total Liabilities 51.8% 45.3% 47.0% 81.2% 79.8% 77.8% 62.2% 70.7% 68.6% 73.1% 67.6% 63.0%

Total Common Equity 43.1% 49.5% 45.8% 18.8% 20.2% 22.2% 36.6% 28.5% 30.5% 25.5% 31.1% 35.7%

Minority Interest 5.0% 5.3% 7.2% - - - 1.2% 0.9% 0.9% 1.4% 1.3% 1.3%

Total Equity 48.2% 54.7% 53.0% 18.8% 20.2% 22.2% 37.8% 29.3% 31.4% 26.9% 32.4% 37.0%

Total Liabilities And Equity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Note: Exp. = expenses

Source: Created by the case writers using data from S&P Capital IQ.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 10 9B20N005

EXHIBIT 3: INCOME STATEMENTS

(in US$ Million)

Disney Netflix Comcast Viacom

Sep-30-2017 Sep-29-2018 Sep-28-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Sep-30-2017 Sep-30-2018 Sep-30-2019

Total Revenue 55,137.0 59, 434.0 69, 570.0 11,692.7 15,794.3 18,875.9 85, 029.0 94, 507.0 108,390.0 13, 263.0 12, 943.0 12, 838.0

Cost Of Goods Sold 30,191.0 32,726.0 42,018.0 8,033.0 9,967.5 11,707.6 25,355.0 29,692.0 34,392.0 7,292.0 6,879.0 6,761.0
Gross Profit 24,946.0 26, 708.0 27, 552.0 3, 659.7 5, 826.8 7, 168.3 59, 674.0 64, 815.0 73,998.0 5, 971.0 6, 064.0 6, 077.0
Selling General & Admin Expenses 8,176.0 8,860.0 11,438.8 1,867.3 2,999.8 3,339.2 31,968.0 34,791.0 40,323.0 3,005.0 3,056.0 3,150.0
R & D Expenses - - - 953.7 1,221.8 1,467.6 - - - - - -
Depreciation & Amortization 2,782.0 3,011.0 4,160.0 — — — 7,914.0 8,281.0 8,772.0 223.0 213.0 215.0
Other Operating Expenses (Income) — — — — — — 2216 2736 4201 — — —
Operating Income (EBIT) 13,988.0 14, 837.0 11, 953.2 838. 7 1, 605.2 2, 361.5 17, 576.0 19, 007.0 20,702.0 2, 743.0 2, 795.0 2, 712.0
Net Interest Exp. (412.0) (574.0) (980.0) (225.4) (377.8) (509.2) (2,755.0) (3,216.0) (4,326.0) (618.0) (560.0) (489.0)
Other Non-Operating Income (Expenses) 320.0 (102.0) (103.0) (128.0) (1.0) 180.0 107.0 (364.0) (603.0) 86.0 (8.0) (12.0)
Other Unusual Items (108.0) 568.0 3073.8 - - - 425.0 (185.0) 230.0 4 -199 - 178.0
Income Tax Expense (4,422.0) (1,663.0) (3,031.0) (73.6) (15.2) (618.4) (7,569.0) (3,380.0) (3,298.0) (293.0) (269.0) (445.0)
Earnings Of Discontinued Operations — — 613.0 — — — — — — — — —
Net Income to Company 9366.0 13066.0 11526.0 411.7 1211.2 1413.9 7784.0 11862.0 12705.0 1922.0 1759.0 1588.0
Minority Int. in Earnings (386.0) (468.0) (472.0) — — — (187.0) (131.0) (299.0) (48.0) (40.0) (40.0)
Net Income 8, 980.0 12, 598.0 11, 054.0 411.679 1,211.2 1, 413.9 7, 597.0 11, 731.0 12,406.0 1, 874.0 1, 719.0 1, 548.0

Weighted Avg. Diluted Shares Out. (mil) 1,578.0 1,507.0 1,666.0 431.9 435.4 437.3 4,708.0 4,584.0 4,542.8 400.6 403.0 403.8
Dividends per Share $1.62 $1.72 $1.76 — — — $0.63 $0.76 $0.82 $0.8 $0.8 $0.8

Note: R & D = research and development; EBIT = earnings before interest and taxes; Exp. = expenses
Source: Created by the case writers using data from S&P Capital IQ.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 11 9B20N005

EXHIBIT 4: COMMON SIZE INCOME STATEMENTS

(in % of Revenue)

Disney Netflix Comcast Viacom

Sep-30-2017 Sep-29-2018 Sep-28-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Sep-30-2017 Sep-30-2018 Sep-30-2019

Total Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cost of Goods Sold 54.8% 55.1% 60.4% 68.7% 63.1% 62.0% 29.8% 31.4% 31.7% 55.0% 53.1% 52.7%
Gross Profit 45.2% 44.9% 39.6% 31.3% 36.9% 38.0% 70.2% 68.6% 68.3% 45.0% 46.9% 47.3%
Selling General & Admin Expenses 14.8% 14.9% 16.4% 16.0% 19.0% 17.7% 37.6% 36.8% 37.2% 22.7% 23.6% 24.5%
R & D Expenses - - - 8.2% 7.7% 7.8% - - - - - -
Depreciation & Amortization 5.0% 5.1% 6.0% - - - 9.3% 8.8% 8.1% 1.7% 1.6% 1.7%
Other Operating Expenses (Income) - - - - - - 2.6% 2.9% 3.9% - - -
Operating Income (EBIT) 25.4% 25.0% 17.2% 7.2% 10.2% 12.5% 20.7% 20.1% 19.1% 20.7% 21.6% 21.1%
Net Interest Exp. (0.7%) (1.0%) (1.4%) (1.9%) (2.4%) (2.7%) (3.2%) (3.4%) (4.0%) (4.7%) (4.3%) (3.8%)
Other Non-Operating Income (Expenses) 0.6% (0.2%) (0.1%) (1.1%) (0.0%) 1.0% 0.1% (0.4%) (0.6%) 0.6% (0.1%) (0.1%)
Other Unusual Items (0.2%) 1.0% 4.4% - - - 0.5% (0.2%) 0.2% 0.0% (1.5%) (1.4%)
Income Tax Expense (8.0%) (2.8%) (4.4%) (0.6%) (0.1%) (3.3%) (8.9%) (3.6%) (3.0%) (2.2%) (2.1%) (3.5%)
Earnings of Discontinued Operations - - 0.9% - - - - - - - - -
Net Income to Company 17.0% 22.0% 16.6% 3.5% 7.7% 7.5% 9.2% 12.6% 11.7% 14.5% 13.6% 12.4%
Minority Interest in Earnings (0.7%) (0.8%) (0.7%) - - - (0.2%) (0.1%) (0.3%) (0.4%) (0.3%) (0.3%)
Net Income 16.3% 21.2% 15.9% 3.5% 7.7% 7.5% 8.9% 12.4% 11.4% 14.1% 13.3% 12.1%

Note: Admin = administrative; R & D = research and development; EBIT = earnings before interest and taxes; Exp. = expenses; Int. = interest
Source: Created by the case writers using data from S&P Capital IQ.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 12 9B20N005

EXHIBIT 5: STATEMENTS OF CASH FLOWS

(in US$ Million)

Disney Netflix Comcast Viacom

Sep-30-2017 Sep-29-2018 Sep-28-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Sep-30-2017 Sep-30-2018 Sep-30-2019

Cash flow from operating activities:

Net Income 8,980.0 12,598.0 11,054.0 558.9 1,211.2 1,413.9 22,735.0 11,731.0 12,406.0 1,874.0 1,719.0 1,548.0
Depreciation & Amortization 2,782.0 3,011.0 4,160.0 71.9 83.2 99.0 10,130.0 11,017.0 12,973.0 223.0 213.0 215.0
Change in Working Capital (266.0) (502.0) 23.0 74.6 199.2 (13.0) (696.0) (1,196.0) (1,675.0) (339.0) (295.0) (76.0)
Other Operating Activities 847.0 (812.0) (8,631.0) (2,491.3) (4,174.1) (4,160.3) (10,908.0) 2,745.0 1,548.0 (53.0) 185.0 (111.0)
Cash from Operation 12,343.0 14, 295.0 6, 606.0 1( ,785.9) (2,680.5) (2,660.5) 21,261.0 24, 297.0 25, 252.0 1, 705.0 1, 822.0 1, 576.0

Cash from investing acitvities:

Capital Expenditure (3,623.0) (4,465.0) (4,876.0) (173.3) (173.9) (215.4) (9,621.0) (10,234.0) (10,972.0) (195.0) (178.0) (194.0)
Sale of Property, Plant, & Equipment - - - - - - - - - 848.0 57.0 5.0
Cash Acquisitions (417.0) (1,881.0) (9,901.0) - - - (532.0) (38,219.0) (38,312.0) (378.0) (112.0) (424.0)
Other Investing Activities (71.0) 710.0 10,659.0 207.6 (165.2) (44.4) (3,380.0) (2,401.0) (3,892.0) 54.0 9.0 5.0
Cash from Investing (4,111.0) 5( ,636.0) (4,118.0) 34. 3 ( 339.1) ( 259.8) (13,533.0) (50,854.0) (53,176.0) 329. 0 ( 224.0) ( 608.0)

Cash flow from financing activities:

Increase (Decrease) in Debt 3,703.0 (2,583.0) 3,677.0 3,020.5 3,961.9 4,305.0 3,197.0 36,362.0 22,436.0 (783.0) (1,000.0) (1,320.0)
Issuance of Common Stock 276.0 210.0 318.0 88.4 124.5 68.3 - - - 172.0 2.0 -
Repurchase of Common Stock (9,368.0) (3,577.0) - - - - (5,435.0) (5,320.0) (1,470.0) - - -
Total Dividends Paid (2,445.0) (2,515.0) (2,895.0) - - - (2,883.0) (3,352.0) (3,643.0) (319.0) (322.0) (322.0)
Other Financing Activities (1,125.0) (378.0) (2,190.0) (31.9) (37.8) (37.6) (2,451.0) (550.0) (143.0) (114.0) (90.0) (102.0)
Cash from Financing (8,959.0) 8( ,843.0) (1,090.0) 3, 077.0 4, 048.6 4, 335.8 7( ,572.0) 27, 140.0 17, 180.0 (1,044.0) (1,410.0) (1,744.0)

Foreign Exchange Rate Adjusted 31.0 (25.0) (98.0) 29.8 (39.7) (34.3) - (245.0) (276.0) 20.0 (20.0) (21.0)
Net Change in Cash ( 696.0) ( 209.0) 1, 300.0 1, 355.2 989. 3 1, 381.2 156. 0 338. 0 (11,020.0) 1, 010.0 168. 0 ( 797.0)

Source: Created by the case writers using data from S&P Capital IQ.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 13 9B20N005

EXHIBIT 6: FINANCIAL RATIO DEFINITIONS

LIQUIDITY RATIOS
Current ratio = Total Current Assets/Total Current Liabilities
Quick ratio = (Cash + Marketable Securities + Account Receivable)/Total Current Liabilities

EFFICIENCY (Resource Management)

Days of inventory = Inventory/(Cost of Goods Sold/365)
Days of accounts receivable = Accounts Receivable/(Revenue/365)
Days of accounts payables = Accounts Payable/(Cost of Goods Sold*/365) *if purchases are not available
Cash conversion cycle = Days of Inventory + Days of Accounts Receivable - Days of Accounts Payable

CAPACITY (Financial Leverage)

Debt/total assets = Interest Bearing Debt/Total Assts
Debt/common equity = Interest Bearing Debt/Common Equity
Interest-bearig debt/EBITDA = Interest Bearing Debt/Operating Income, Before Depreciation
EBITDA/interest = Operating Income, Before Depreciation/Interest Expense
EBIT/interest = Operating Income/Interest Expense

PROFITABILITY
Return on common equity = Net Income (Loss)/Common Equity
Return on assets = Net Income/Total Assets

ROE DECOMPOSITION (Dupont formula)

Return on equity = Profit Margin × Asset Turnover × Leverage
Profit margin = Net Income/Revenue
Asset turnover = Revenue/Total Assets
Financial leverage = Total Assets/Total Equity

Note: EBIT = earnings before interest and taxes; EBITDA = earnings before interest, taxes, depreciation, and amortization
Source: Created by the case authors.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 14 9B20N005

EXHIBIT 7: COMPARATIVE FINANCIAL RATIOS

Disney Netflix Comcast Viacom

Sep-30-2017 Sep-29-2018 Sep-28-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Sep-30-2017 Sep-30-2018 Sep-30-2019
LIQUIDITY RATIOS
Current ratio 0.94 1.00 1.07 1.40 1.49 0.73 0.74 0.79 0.86 1.68 1.50 1.49
Quick ratio 0.75 0.80 0.80 0.52 0.58 0.68 0.56 0.54 0.55 1.29 1.16 1.17

EFFICIENCY (Resource Management)

Days of inventory 32.0 30.2 54.3 — — — — — — 46.0 47.5 41.8
Days of accounts receivable 57.1 57.3 81.2 — — 9.0 37.9 42.9 36.0 95.1 88.7 105.7
Days of accounts payables 76.2 72.5 155.9 16.3 20.6 13.8 99.4 104.4 108.2 21.6 23.0 26.0
Cash conversion cycle 13.0 15.0 -20.4 -16.3 -20.6 -4.8 -61.5 -61.5 -72.3 119.5 113.2 121.5

CAPACITY (Financial Leverage)

Debt/total assets 0.2 0.2 0.2 0.3 0.4 0.4 0.3 0.4 0.4 0.5 0.4 0.4
Debt/common equity 0.5 0.4 0.5 1.8 2.0 1.8 0.9 1.5 1.3 1.8 1.3 1.0
Interest-bearing debt/EBITDA 1.3 1.0 2.7 7.7 6.5 5.3 2.3 3.9 3.4 3.7 3.2 3.0
EBITDA/interest 40.7 31.1 16.4 3.7 4.2 4.6 9.3 8.5 6.8 4.8 5.4 6.0
EBIT/interest 34.0 25.8 12.2 3.7 4.2 4.6 6.4 5.9 4.8 4.4 5.0 5.5

PROFITABILITY
Return on common equity 21.7% 25.8% 12.4% 11.5% 23.1% 20.6% 11.1% 16.4% 15.9% 31.1% 23.2% 18.3%
Return on assets 9.4% 12.8% 5.7% 2.2% 4.7% 4.6% 4.1% 4.7% 4.8% 7.9% 7.2% 6.5%

GROWTH (Over Prior Year)

Revenue 7.8% 17.1% 35.1% 19.5% 11.1% 14.7% (2.4%) (0.8%)
Operating income 6.1% (19.4%) 91.4% 47.1% 8.1% 8.9% 1.9% (3.0%)
Net income 40.3% (12.3%) 194.2% 16.7% 54.4% 5.8% (8.3%) (9.9%)

ROE DECOMPOSITION (Dupont formula)

Return on common equity 21.7% 25.8% 12.4% 11.5% 23.1% 20.6% 11.1% 16.4% 15.9% 31.1% 23.2% 18.3%
Profit margin 16.3% 21.2% 15.9% 3.5% 7.7% 7.5% 8.9% 12.4% 11.4% 14.1% 13.3% 12.1%
Asset turnover 0.58 0.60 0.36 0.61 0.61 0.61 0.45 0.38 0.42 0.56 0.54 0.54
Financial leverage 2.32 2.02 2.18 5.31 4.96 4.51 2.73 3.51 3.28 3.93 3.21 2.80

Note: EBIT = earnings before interest and taxes; EBITDA = earnings before interest, taxes, depreciation, and amortization
Source: Created by the case authors using data from S&P Capital IQ; simplified by case writer.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 15 9B20N005

EXHIBIT 8: COMPARATIVE VALUATION METRICS

(in US$)

Disney Netflix Comcast Viacom

Sep-30-2017 Sep-29-2018 Sep-28-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Dec-31-2017 Dec-31-2018 Sep-30-2019 Sep-30-2017 Sep-30-2018 Sep-30-2019
Share price ($) 102.74 113.03 146.93 195.54 346.71 275.3 36.27 35.84 44.84 23.69 32.99 22.47

Earnings per share ($) 5.69 8.36 6.64 0.95 2.78 3.23 1.61 2.56 2.73 4.68 4.27 3.83

Common shares outstanding (millions) 1,578 1,507 1,666 432 435 437 4,708 4,584 4,543 401 403 404
Market value of equity ($millions) 162,124 170,336 244,785 84,451 150,949 120,378 170,759 164,291 203,697 9,490 13,295 9,073
Book value of equity ($millions) 41,315 48,773 88,877 3,582 5,239 6,862 68,616 71,613 78,144 6,035 7,407 8,454
Book value per share ($) 26.18 32.36 53.35 8.29 12.03 15.69 14.57 15.62 17.20 15.06 18.38 20.94
Market to book ratio 3.9 3.5 2.8 23.6 28.8 17.5 2.5 2.3 2.6 1.6 1.8 1.1
Total enterprise value ($millions)* 188,852 193,607 302,231 90,950 161,309 132,803 232,381 273,395 305,928 20,922 23,114 18,020
Enterprise value / revenue 3.4 3.3 4.3 7.8 10.2 7.0 2.7 2.9 2.8 1.6 1.8 1.4
Enterprise value / EBITDA 11.3 10.8 18.8 108.4 100.5 56.2 9.1 10.0 10.4 7.1 7.7 6.2
Enterprise value / EBIT 13.5 13.0 25.3 108.4 100.5 56.2 13.2 14.4 14.8 7.6 8.3 6.6
Price / Earnings 18.1 13.5 22.1 205.1 124.6 85.1 22.5 14.0 16.4 5.1 7.7 5.9

3-month Treasury Bill yield 1.05% 2.14% 1.76%

6-month Treasury Bill yield 0.42% 2.31% 1.85%
12-month Treasury Bill yield 0.58% 2.58% 1.78%

Real U.S. GDP Growth (year-over-year) 2.22% 2.86%

P/E Ratios:
S&P 500 23.7 21.3 21.7
NASDAQ Composite 49.8 19.2 31.5

*Total enterprise value is estimated as the market value of equity plus the book value of interest-bearing debt plus minority interest
Note: GDP = gross domestic product; P/E = price/earnings; EBIT = earnings before interest and taxes; EBITDA = earnings before interest, taxes, depreciation, and amortization
Source: Created by the case authors using data from S&P Capital IQ and case writer’s calculations, all accessed January 13, 2020, 3 month Treasury Bill,
https://ycharts.com/indicators/3_month_t_bill; 6 month Treasury Bill, https://ycharts.com/indicators/6_month_treasury_bill_rate; 12 month Treasury Bill,
https://ycharts.com/indicators/1_year_treasury_rate; US GDP Growth, https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=US; S&P 500:
www.multpl.com/s-p-500-pe-ratio/table/by-month; NASDAQ Composite, www.macrotrends.net/stocks/charts/NDAQ/nasdaq/pe-ratio.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 16 9B20N005

EXHIBIT 9: ANALYSTS’ CONSENSUS FORECASTED REVENUE, PROFITS AND VALUATION METRICS

(in US$ million)

Disney Netflix Comcast Viacom

2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021
Revenue 69,570 A 81,766 86,723 20,134 24,532 29,199 108,770 114,530 116,249 12,838 A 13,275 13,631
EBITDA 16,113 A 18,235 19,639 3,120 4,551 6,254 34,292 36,590 37,609 2,927 A 2,945 2,965
EBIT 11,953 A 15,244 16,964 2,633 3,941 5,507 21,142 23,252 23,987 2,712 A 2,719 2,751
Net Income 11,054 A 8,684 10,125 1,528 2,495 3,831 13,092 14,378 15,225 1,548 A 1,712 1,799

Enterprise value/revenue 4.3 3.0 2.8 7.3 5.6 4.7 2.7 2.5 2.4 1.4 1.3 1.2
Enterprise value/EBITDA 18.8 13.5 12.4 47.0 29.9 22.0 8.7 7.9 7.3 6.2 6.0 5.6
Enterprise value/EBIT 25.3 16.2 14.4 55.8 34.6 24.9 14.1 12.4 11.4 6.6 6.5 6.0
Price/earnings 22.1 24.3 19.7 89.5 49.6 32.3 15.4 14.0 12.7 5.9 5.9 5.9

Note: EBIT = earnings before interest and taxes; EBITDA = earnings before interest, taxes, depreciation, and amortization; A = actual
Source: Created by the case authors using data from S&P Capital IQ and case writer’s calculations.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
 Page 17 9B20N005

EXHIBIT 10: STOCK PERFORMANCE

November 2016 to November 2019
Indexed to November 2016 = 100

Source: Created by the case authors using data from S&P Capital IQ.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.
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ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of The Walt Disney Company or any of its employees, or of other companies
mentioned in the case.
2
Nasdaq.com, “Peter Lynch Fair Value – Value Companies with Peter Lynch’s Simple Rule of Thumb,” July 11, 2012, accessed January
16, 2020, www.nasdaq.com/articles/peter-lynch-fair-value-value-companies-peter-lynchs-simple-rule-thumb-2012-07-11.
3
Box Office Mojo, “All Time Box Office—Worldwide Gross,” www.boxofficemojo.com/alltime/world/, accessed September 28,
2019; All currency amounts are in US dollars unless otherwise specified.
4
Disney Parks, “Star Wars: Galaxy’s Edge—Now Open!,” accessed September 28, 2019,
https://disneyparks.disney.go.com/ca/star-wars-galaxys-edge/.
5
Disney+, “Preview,” https://preview.disneyplus.com/ca/, accessed September 28, 2019.
6
The International Trade Administration (ITA), US Department of Commerce, “Media and Entertainment Spotlight,”
www.selectusa.gov/media-entertainment-industry-united-states, accessed October 10, 2019.
7
PwC, “Perspectives from the Global Entertainment & Media Outlook 2019–2023,” 2,
www.pwc.com/gx/en/industries/tmt/media/outlook.html, accessed January 8, 2020.
8
Deloitte, “2019 Media & Entertainment Industry Outlook,” 2, www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-
media-telecommunications/us-tmt-2019-media-and-entertainment-industry-outlook.pdf, accessed January 8, 2020.
9
Business Wire, “CBS and Viacom to Combine,” www.businesswire.com/news/home/20190813005648/en/, accessed
October 11, 2019.
10
The Walt Disney Company, “Disney and 21st Century Fox Announce per Share Value in Connection with $71 Billion
Acquisition,” www.thewaltdisneycompany.com/disney-and-21st-century-fox-announce-per-share-value-in-connection-with-
71-billion-acquisition/, accessed October 10, 2019.
11
PwC, “Perspectives from the Global Entertainment & Media Outlook 2019–2023,” op. cit.
12
PwC, “Global Entertainment & Media Outlook,” www.pwc.com/gx/en/industries/tmt/media/outlook/segment-findings.html,
accessed October 3, 2019.
13
Ibid.
14
Statista, “Digital Media Report 2019,” 5, www.statista.com/study/44526/digital-media-report/, accessed January 8, 2020.
15
Statista, “Video Streaming (SVoD)—Worldwide,” www.statista.com/outlook/206/100/video-streaming--svod-
/worldwide#market-globalRevenue, accessed October 10, 2019.
16
Eventbrite, “Millennials: Fueling the Experience Economy,” 2, www.eventbrite.com/blog/academy/millennials-fueling-
experience-economy/, accessed January 8, 2020.
17
Forbes, “'Experience Economy' Boosts Theme Park Spending to a Record $45 Billion,” www.forbes.com/sites/csylt/2018/11/04/
experience-economy-boosts-theme-park-spending-to-a-record-45-billion/#39e24a0529e4, accessed October 3, 2019.
18
Universal Beijing Resort, “About Universal Beijing Resort,” www.universalbeijingresort.com/en/content/about-us, accessed
October 3, 2019.
19
IBIS, “Global Movie Production & Distribution, Industry Performance,”
https://clients1.ibisworld.com/reports/gl/industry/currentperformance.aspx?entid=2150, accessed October 10, 2019.
20
Statista, “Film Industry – Statistics & Facts,” www.statista.com/topics/964/film/, accessed October 3, 2019.
21
IBIS, “Global Movie Production & Distribution, Industry Performance,”
https://clients1.ibisworld.com/reports/gl/industry/currentperformance.aspx?entid=2150, accessed October 10, 2019.
22
Vogue, “Netflix vs. Hollywood: The fight to Define the Future of Film,” www.vogue.fr/fashion-culture/article/netflix-vs-
hollywood-the-fight-to-define-the-future-of-film, accessed October 3, 2019.
23
The Walt Disney Company, “About the Walt Disney Company,” www.thewaltdisneycompany.com/about/, accessed October
11, 2019.
24
Ibid.
25
Stock Split History, www.stocksplithistory.com/walt-disney/#targetText=Walt%20Disney%20(DIS)%20has%208,share
holder%20now%20owned%20103%20shares.&targetText=DIS's%20third%20split%20took%20place%20on%20March%20
01%2C%201971, accessed October 14, 2019.
26
Disney, The Walt Disney Company Fourth Quarter and Full Year Earnings for Fiscal 2019, 1.
27
Ibid.
28
Disney, The Walt Disney Company Fourth Quarter and Full Year Earnings for Fiscal 2019, 3.
29
Ibid.
30
Ibid.
31
Ibid.
32
The Wall Street Journal, “Disney Bans Netflix Ads as Streaming’s Marketing Wars Intensify,” www.wsj.com/articles/disney-bans-netflix-
ads-as-streamings-marketing-wars-intensify-11570199291?mod=searchresults&page=1&pos=1, accessed October 12, 2019.
33
GIZMODO, “The Latest Disney+ Blow to Netflix Is a $5 Subscription Deal,” https://gizmodo.com/the-latest-disney-blow-to-
netflix-is-a-5-subscription-1838887195, accessed October 12, 2019.
34
Netflix Inc., Annual Report 2018, 1.
35
Ibid.
36
Ibid.
37
Ibid.; Statista, “Netflix—Statistics & Facts,” www.statista.com/topics/842/netflix/, accessed October 26, 2019.
38
Ibid.

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39
Statista, “Number of Netflix Paid Streaming Subscribers Worldwide 2011–2019,” www.statista.com/statistics/250934/quarterly-
number-of-netflix-streaming-subscribers-worldwide/, accessed October 26, 2019.
40
Statista, “Number of Netflix Paid Streaming Subscribers in the US 2011–2019,”
www.statista.com/statistics/250937/quarterly-number-of-netflix-streaming-subscribers-in-the-us/, accessed October 26, 2019.
41
Statista, “Share of Netflix Subscribers among VoD Users in the United States in 2018,”
www.statista.com/statistics/421839/netflix-internet-user-age-usa/, accessed October 26, 2019.
42
Netflix Inc. Annual Report 2018, op. cit.
43
S&P Capital IQ database.
44
Netflix Investors, “Netflix's View: Internet Entertainment Is Replacing Linear TV,” www.netflixinvestor.com/ir-overview/long-
term-view/default.aspx, accessed on October 26, 2019.
45
Viacom Inc., Annual Report 2018, 1.
46
Ibid.
47
Ibid.
48
Viacom Inc., Annual Report 2018, op. cit., 2.
49
Ibid.
50
Ibid.
51
S&P Capital IQ database, op. cit..
52
Viacom Inc., Annual Report 2018, op. cit., 13.
53
ACCESS, “VIMN and ACCESS launch partnership in Germany to Bring TV Entertainment Experiences into the Auto
Industry,” www.access-company.com/en/news_event/archives/2019/vimn-and-access-launch-partnership-in-germany-to-
bring-tv-entertainment-experiences-into-the-auto-industry/, accessed on October 26, 2019.
54
Viacom, “What 5G Means for Distributors,” www.viacom.com/news/what-5g-means-for-distributors, accessed October 26, 2019.
55
Viacom and CBS Corporation, press release, August 13, 2019.
56
Fox Business, “CBS, Viacom Agree to Merge, Forming a $28B Entertainment Firm,” August 13, 2019,
www.foxbusiness.com/media/cbs-viacom-merger-agreement, accessed January 3, 2020.
57
Ibid.
58
Ibid.
59
Ibid.
60
Comcast, Comcast Corporation Annual Report 2018, 1.
61
S&P Capital IQ database, op. cit..
62
Ibid.
63
Comcast Corporation, Annual Report 2018, op. cit.
64
Statista, “Number of Comcast video subscribers in the United States from the 1st quarter 2014 to 3rd quarter 2019,”
www.statista.com/statistics/497279/comcast-number-video-subscribers-usa/, accessed October 29, 2019.
65
Comcast Corporation, Annual Report 2018, op. cit.
66
Ibid.
67
Investopedia, “Top 5 Companies Owned by Comcast,” www.investopedia.com/articles/markets/101215/top-4-companies-
owned-comcast.asp, accessed October 27, 2019.
68
Comcast Corporation, Annual Report 2018, op. cit.
69
Ibid.
70
S&P Capital IQ database, op. cit.
71
Statista, “Real GDP growth of the United States from 1990 to 2018”, www.statista.com/statistics/188165/annual-gdp-growth-
of-the-united-states-since-1990/, accessed November 11, 2019.
72
Ibid.
73
Bloomberg, “US Recession Chances Inch Down to 26% Within Next 12 Months,” www.bloomberg.com/graphics/us-
economic-recession-tracker/, accessed November 11, 2019.
74
Statista, “Economic Outlook United States,” www.statista.com/study/24801/economic-outlook-united-states/, accessed
November 11, 2019.
75
Federal Reserve Economic Data, 10-Year Treasury Constant Maturity Rate, https://fred.stlouisfed.org/series/DGS10,
accessed November 12, 2019.
76
Federal Reserve Economic Data, 1-Year Treasury Constant Maturity Rate, https://fred.stlouisfed.org/series/DGS1,
accessed November 12, 2019.
77
Federal Reserve Economic Data, “10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity,”
https://fred.stlouisfed.org/series/T10Y3M, accessed November 12, 2019.
78
International Monetary Fund, “World Economic Outlook Reports,” www.imf.org/en/Publications/WEO, accessed November
11, 2019.
79
Statista, “China: growth rate of real gross domestic product (GDP) from 2011 to 2024,”
www.statista.com/statistics/263616/gross-domestic-product-gdp-growth-rate-in-china/, accessed November 13, 2019.
80
Ibid.
81
International Monetary Fund, “China's Economic Outlook in Six Charts,”
www.imf.org/en/News/Articles/2019/08/09/na080919-chinas-economic-outlook-in-six-charts, accessed November 13, 2019.
82
Fortune, “Caught Between Trade Wars and Brexit, EU Cuts Economic Outlook as It Sees Dismal Growth Into 2022,”
accessed November 13, 2019.
83
Ibid.

This document is authorized for use only in Ken Okamura's MLF HT22 Corporate Valuation (Assessment Case) at University of Oxford from Jan 2022 to Jul 2022.