Stock Market Series

Are American Entertainment Companies Great To Buy and Hold Long-Term (Part 1)?

If you have read my Stock Watch List, you know that I have included a few American entertainment companies that declare dividends regularly.

With the decrease in TV advertisement revenues due to the popularities of Netflix and Youtube, are American entertainment companies still have durable competitive advantage?

In this post, we will look at The Walt Disney Company (NYSE:DIS), CBS Corporation (NYSE:CBS) and Twenty-First Century Fox Inc. (NASDAQ:FOXA).

The Walt Disney Company is an American diversified multinational mass media and entertainment conglomerate based at the Walt Disney Studios in Burbank, California. It is the world’s second largest media conglomerate in terms of revenue after Comcast.  The company was found by Walt Disney and Roy Disney in 1923 as the Disney Brothers Cartoon Studio, and established itself as a leader in the American animation industry before diversifying into live-action film production, television, and theme parks.   Today, the Walt Disney Company owns and operate ABC, such as Disney Channel, ESPN, A & E Networks in addition to Walt Disney Studios and Walt Disney Parks and Resorts.

Here is the financial statement analysis of the Walt Disney Company from 2013 to 2016 (Click here if you need a refresher on accounting formulas):

Screen Shot 2017-09-26 at 9.50.15 PM

Personally, I think the Walt Disney Company still has durable competitive advantage. First of all, retained earning increases every year.  Second of all, the company’s current ratio is high.   Third of all, net income on total revenue increases every year.  Lastly, gross profit used in selling, general and administrative expense decreases every year.

However, I would keep my eyes on debt to shareholders’ equity ratio and return on capital expenditure as I do not want both to be over 1 and 50%, respectively.

Following this further, CBS Corporation is an American mass media corporation focused on commercial broadcasting, publishing, and television production, with most of its operations in the United States.  The company has its headquarter in the CBS Building in Manhattan, New York City.  CBS Corporation also owns and operates Showtime Networks, Simon & Schuster, The CW Network and Pop TV.

Here is the financial statement analysis of CBS Corporation from 2013 to 2016:

Screen Shot 2017-09-27 at 5.39.55 PM

Without a doubt, I will not invest in CBS Corporation because of the company’s negative retained earnings and high debt to shareholders’ equity ratio (meaning CBS is using debt to finance its operation).

Pursuing this further, Twenty-First Century Fox Inc. is an American multinational mass media corporation based in Manhattan, New York City.  The company’s assets include the Fox Entertainment Group, which owns the 20th Century Fox film studio and Fox television network, and Star TV in Hong Kong.

Here is the financial statement analysis of Twenty-First Century Fox Inc. from 2014 to 2017 (the company’s fiscal year ends on June of every year):

Screen Shot 2017-09-27 at 5.09.50 PM

Likewise, I do not think Twenty-First Century Fox Inc. has durable competitive advantage because the company’s debt to shareholders’ equity ratio is increasing every year.

To summarize, The Walt Disney Company is the only company that has long-term competitive advantage so far.  The annual return of dividends would be 3.14% if I buy the stock with the current price of $99.24. NOT BAD!

In the next post, we will look at Comcast, Viacom and Time Warner.  Please leave a comment below! Catch you on the flip side!


3 thoughts on “Are American Entertainment Companies Great To Buy and Hold Long-Term (Part 1)?”

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