Walt Disney (DIS) is a leading media and entertainment conglomerate that manages a series of complementary business segments:

• Theme parks and resorts: makes up 31% of revenue and 21% of profits
• Media networks: makes up 45% or revenue and 64% of profits
• Studio entertainment: makes up 13% of revenue and 6% of profits
• Consumer products: makes up 8% of revenue and 10% of profits
• Interactive: makes up 3% of revenue and 1% of profits

Anyone that has young kids at home can probably explain Disney’s profit model better than I or any financial analyst may be able to, but let me try to explain.

Take the blockbuster movie Frozen. Disney’s studio entertainment division released the movie last year, and Disney’s media networks marketed it heavily before and after the release through its cable channels (The Disney Channel, ABC Family and other outlets).

Next come the related toys, books games and music produced by the consumer products segment, and when the movie buzz gets really big, you get Frozen-themed rides at Disney theme parks and resorts and other recreational activities — all supported by Disney interactive, which produces websites and manages Disney’s online businesses.

Pure genius. Walt would no doubt be proud.

DIS: First Half Looks Great

The Disney machine appears to be in great working order for the first half of the year. Coming off a great year-end quarter (Disney’s fiscal year-end is in September), the good news kept coming into this year.

For the quarter ending March 29, net income increased 27% to $2 billion. The biggest driver of this growth was the studio business that saw operating income quadruple to $475 million with revenues increasing 38% to $1.8 billion. After releasing the movie Frozen to home video in March, it became the best-selling Blu-ray disc and digitally downloaded movie ever and is still generating substantial theater revenue in foreign markets, no doubt driving this growth.

For the quarter ended June 28, all business units except for Disney’s media segment reported double-digit growth. The media segment includes ESPN, and ESPN was hit with the higher costs for Major League Baseball and World Cup Soccer, which drove profits down 7% to $1.9 billion.

Even with this drag on earnings, Disney reported the highest earnings per share for the first three quarters of fiscal 2014 than in any previous full fiscal year.

DIS: Great Company, But Overvalued

Although I anticipate Disney being able to generate both top- and bottom-line growth for the rest of the year and into 2015, the valuation is rich at a current P/E of 21.5 and 19.5 forward P/E. Analysts have a 12-month price target of just $93.50, whereas Disney stock currently trades close to $90. Meanwhile, Disney doesn’t have much of a dividend either, with a yield of just 1%.

There is a decent argument that Disney stock has additional price appreciation as a momentum stock. Disney’s stock is trading close to its all-time high of $91.20, it has consistent quarterly and annual earnings growth (both at the total company and EPS level), and Disney stock continues to outpace the market with the S&P 500 up 8.8% for the year.

However, momentum trading requires a constant sharp eye on the market in identify when the trend changes … and most investors just don’t have that kind of time, myself included.

If you’re a value investor like myself, avoid Disney and go with a stock that has a greater margin of safety.

As of this writing, Kenneth Fick did not hold a position in any of the aforementioned securities. Write him at kfick@piercethefog.com or follow him on his blog at www.piercethefog.com.