Walt Disney Co (DIS) Stock Doesn’t Meet My NexGen Buy Criteria

DIS stock hasn't gained ground for the past two years

In order to make a profound impact on your portfolio, you have to go beyond Wall Street’s narrow focus of picking stocks. Many analysts and advisors focus only on the fundamentals while others rely solely on chart reading. Both of these are important, but those of you who invest with me regularly know that I like to dig a lot deeper. That’s why I implement a three-prong approach that gives us a fully comprehensive picture of a stock before we invest in it.

Those three prongs are the fundamentals, technicals and what I like to call the intangibles.

Today I want to use those three criteria to analyze a stock that has been stuck in a rut recently: Walt Disney Company (NYSE:DIS). The stock is trading at the same level as it was in early 2015, and until recently it was down year-to-date while the broad indices have been hitting new all-time highs.

Let’s see how it measures up on my criteria checklist.

Fundamentals: Disney is starting to see better earnings growth in its future, with the bottom line expected to increase from $5.72 per share last year to nearly $8 per share by 2020. DIS stock’s forward PE ratio is 15.88x, which is below that of the overall market as well as many of its peers.

While much of this growth is still years in the making, a case could be made for this well-known, mega-cap company. Check.

Technicals: DIS stock’s recent rally has the stock trading at its best level in two weeks and back above all three major moving averages. However, it remains below important price resistance around $109.

Until it can breakout above that level, I will not consider DIS stock a buy. Miss.

Intangibles: Three things stand out to me here. First, there is the struggling ESPN division that has experienced well-documented issues and major layoffs. Second is the fact that recent movies haven’t kept up with past successes. Third, and possibly the most important, is the question of who will be the next leader.

Current CEO Bob Iger will leave Disney in July 2019 and the announcement of his replacement could either boost the shares or hurt them drastically. At this point, it’s too early to speculate. Miss.

Unfortunately for Disney, hitting just one of my three criteria points isn’t going to cut it. DIS stock is not terrible but also not great, and I think that pretty much sums up why it is trading near the same prices it commanded more than two years ago.

Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.


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