This document analyzes the comparative financial performance of Walt Disney Company from 2012-2014 based on its balance sheets, income statements, and SEC filings. It finds that Disney's revenue and operating income increased steadily each year, outperforming industry averages. However, its net income growth was lower than competitors like Comcast and Fox due to large acquisitions. Disney also pays lower dividends but achieves strong returns through stock price growth. Overall, Disney is highly profitable with consistent performance across sectors, though it could leverage more debt to maximize returns.

1. Running head: COMPARATIVE ANALYSIS 1
Walt Disney Company Comparative Analysis
Craig Philpot
Liberty University

2. COMPARATIVE ANALYSIS 2
Comparative Analysis
Introduction
A comparative analysis involves review of balance sheets, income statements or
statements of cash flows in consecutive periods (Wild, Bernstein and Subramanyam, 2014, p.
28). Also referred to as a horizontal analysis, this study can involve either year-to-year change
or index-number trend analysis (Wild et al, 2014, p. 28). Based on the excel project financial
statements, SEC filings, and indexing websites, this paper will use the year-to-year trend method
for Walt Disney Company. Much like the comparative analysis example on page 28 in the text,
the focus is on “items of note” (Wild et al, 2014). If every single item were to be discussed and
analyzed, the paper would be long indeed. There are easily twenty items representing a new
trend on both the income statements and balance sheets. For the sake of summary and clarity,
this paper will examine the most important items with comparison to competitors, as reflected on
the financial statements and compared to industry standards.
Historical Statements, Competitors, and Industry Averages
Revenue and operating income are closely linked together and show how profitable a
company is after operating expenses. From 2012-2013, revenue, operating expense, and
operating income all increased by about 6%. From 2013-2014, revenue increased 8.37% while
operating income increased 22.12%. This indicates that revenue increased more than operating
expenses. In their SEC filing, Disney reported positive returns from several operating segments.
The studio entertainment segment in particular saw a 20% increase in revenue, coming from
several Marvel films, Maleficent, Frozen and other titles (Walt Disney Company, 2014).
According to CSImarket.com - a website that tracks trends and compares companies
within their industry - Disney ranks third in revenue and fourth in operating income (2015). In

3. COMPARATIVE ANALYSIS 3
the broadcasting media and cable sector - they rank 30th. Their three-year average for operating
income growth is 14.22% (factoring the percentage increase from 2011-2012 not shown in the
Excel project). Competitors Comcast and Fox 21st Century had 5-year average growth of
15.62% and 9.77% respectively. Industry average was at 8.62% (CSI Market, 2015).
Net income average across three years was 15.17% growth, compared with the following
industry averages: Comcast at 18.16%, Fox at 26.42% and overall industry at 29.42% (CSI
Market, 2015) Given that Disney has roughly similar operating income growth as its
competitors, there are a few reasons for an overall lower net income increase. As discussed in
last week’s cash flow analysis, Disney has been involved in several recent acquisitions, including
Marvel and LucasFilm, both of which were multi-billion dollar purchases. These capital
expenditures are having an impact on the financial statements. The following discussion of
earnings per share will reveal some of that impact.
As there will be a discussion below of Disney’s low dividend payout, it is important to
compare its earnings per share to competitors. In the absence of substantial dividends,
shareholders rely on robust returns from their shares of Disney stock. The greater the earnings
per share, the happier the shareholders, the better the company does. Disney was able to grow its
EPS 24.21% in 2012 before suffering a significant downturn in 2013 of -75.4%. The company
came back in 2014 with a 435.25% increase. Comcast has increased its earnings 52% in 2012,
12.28% in 2013, and 25% in 2014. . Fox had earnings growth of -9.62%, 544.68% and -44.88%
for the past three years. Industry average was 32.04% overall.
The primary item Disney needs to explain here is its 75% loss on EPS in 2013.
According to the SEC filings, the company had increased television costs in excess of $700
million for maintaining the rights to sports’ networks, increased marketing costs for the start of

4. COMPARATIVE ANALYSIS 4
the 2014 fall season, incurred almost $4 Billion in operating expenses of its extensive properties,
and incurred continued amortized expenses from their acquisition of Marvel. (Walt Disney
Company, 2013) Though the company is already showing enormous profitability from their
expenditures, the short-term effects have been significant.
Strengths and Weaknesses
In a horizontal analysis, it is important to remember the context of prior analyses.
These all factor into a discussion of a company’s strengths and weaknesses. It is as though each
analysis gives the user a piece of the puzzle. Put together, they form a bigger picture of the
company. The ratio analysis determined Disney has no problems with immediate liquidity, nor
with its leverage, although they could probably leverage themselves more to maximize greater
returns on investment.
Yet Disney has been firmly established as a billion dollar brand with a host of
trademarked characters, worldwide resorts, theme parks, entertainment labels, etc. The list
becomes quite long. The number of operating sectors alone for this company are impressive.
This is probably why one investing website raved about Disney’s recent soar in its EBIT margin
compared to competitors (Bylund, 2015). A quick look at Disney’s common-sized income
statements reveals one large strength: consistency. Performing well against competitors is one
thing, doing it repeatedly across several years is even better. Even in the area of net income,
where Disney trails its competitors, there is a consistency across the past three years. Disney
consistently has about the same proportion to its operating expenses, revenue, net income, EBT
and dividends. On the subject of dividends, Disney does not pay very well in its dividends to
shareholders compared to competitors. Despite its high performance in other areas, Disney stock
only pays a 1.1% annual dividend to its shareholders (Bylund, 2015). Yet the analysis of

5. COMPARATIVE ANALYSIS 5
earnings per share revealed that Disney is a high-level brand, and its investors are able to make
returns through the skyrocketing prices of Disney stock. The critical author of Disney’s dividend
policy claimed to be a shareholder nonetheless (Bylund, 2015).
The implications for financial analysis ought to be obvious for Disney. This analyst
determines a strong likelihood that they will continue to be very profitable in the future. In fact,
the 2015 figures not included in this report - operating income, net income, EBIT and EPS -all
increased. As the cash flow analysis determined last week, the recent acquisitions of the
company will see high returns on investment in media sectors.
Financial Leverage
There are two ways ROA seems to be calculated. It is either the return on average total
assets, or the return on total assets for the year. CSI market takes the simple approach, and
calculates Return on Total Assets on a year-to-year basis, not taking the average for each year.
The resulting percentages are 8.24%, 8.17%, and 9.51% for the years 2012-2014 respectively
(2015). Comcast saw a return on investment of 3.76%, 4.29% and 5.26% for the same years
(CSI Market, 2015). Twenty First Century Fox saw ROA of 2.42%, 14.37% and 8.48% (CSI
Market, 2015). The industry average is 3.07%. Fox is compromised by its 2.42% returns in
2012, otherwise giving an impressive return. Comcast has consistency, but much lower returns
than Disney. Disney dominates in ROA, both in industry average and against competitors
Return on Capital Expenditures is calculated: EBIT divided by average capital
expenditures (average total assets – current liabilities). Disney’s ROCE is 15.26%, 3.35%, and
17.64% for years 2012-2014 based on figures from SEC filings. ROCE data was not readily
available on any financial website for either Comcast or Fox. Having personally computed data
from the SEC website, the following are the ratios for each company (from 2012-2014).

6. COMPARATIVE ANALYSIS 6
Comcast has ROCE of 10.3%. 10.5%, and 11.73%. Fox had ROCE of 8.39%, 21.57% and
14.05%. Industry averages were not available, but based on competition, Disney is not
leveraging itself as much as it could. Percentages are not as important as the figures represented.
The text makes this point on page 28 in describing comparative analysis (Wild et al, 2014). A
company that returned 50% on EBIT of $500 million is not nearly as profitable as the company
that returned 10% on $100 Billion. This is where a company can use debt liabilities to increase
leverage. In Comcast’s case, they are leveraging about 30% current debt against their total
assets, in order to maximize returns. Disney leverages about 15% current liabilities against total
assets, and Fox leverages 10%. Disney was able to return 15-17% in 2012 and 2014. Had they
taken on more debt, the returns would have been greater.

7. COMPARATIVE ANALYSIS 7
References
Bylund, A. (2015, April 17). Walt Disney Co. Stock Ratio Analysis -- The Motley Fool.
Retrieved from http://www.fool.com/investing/general/2015/04/17/walt-disney-co-stock-
ratio-analysis.aspx
Walt Disney Company. (2013) Form 10-K 2013. Retrieved from SEC EDGAR website
http://www.sec.gov/Archives/edgar/data/1001039/000100103913000164/fy2013_q4x10k
.htm
Walt Disney Company. (2014) Form 10-K 2014. Retrieved from SEC EDGAR website
http://www.sec.gov/Archives/edgar/data/1001039/000100103914000228/fy2014_q4x10k
.html
Walt Disney Revenue Growth Rates (DIS), Current and Historic Growth - CSIMarket. (n.d.).
Retrieved December 8, 2015, from
http://csimarket.com/stocks/single_growth_rates.php?code=DIS&rev
Wild, J.J., Bernstein, L.A., & Subramanyam, K. R. (2014). Financial statement
analysis(11th ed.). Boston, MA: McGraw-Hill.