The Walt Disney CompanyDISNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $188.03 per share(market-calibrated)

+80.2%

Upside to Fair Value

Current

$104.33

Pure Model

$194.05

Fair Value

$188.03

Bull Case

$236.78

Bear Case

$153.16

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $194.05.

What's Driving This Ratingfor DIS

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.70% of revenue (heavy investment phase). Model fades this to 4.50% by Year 10, freeing up ~$1.6B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 23.54% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 7.11% in Year 1 to 1.42% by Year 5 (per analyst consensus). That's below the 3.00% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $146.03/share (16.3x terminal FCF) while exit multiple gives $242.07/share (33.1x terminal FCF). The 22x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 66.47% indicates efficient cash generation. FCF reaches $25.1B by Year 10 (19.30% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.42

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.89%

Cost of Debt

Pre-tax Cost of Debt3.48%

Tax Rate21.00%

After-tax Cost of Debt2.75%

Equity Weight (E/V)80.75%

Debt Weight (D/V)19.25%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (80.75% × 10.89%) + (19.25% × 2.75%)

= 9.32%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$101.1B	$110.0B	$115.9B	$120.3B	$130.3B
EBIT	$23.8B	$25.9B	$27.3B	$28.3B	$30.7B
Tax	$5.0B	$5.4B	$5.7B	$5.9B	$6.4B
NOPAT	$18.8B	$20.4B	$21.6B	$22.4B	$24.2B
+ Depreciation	$5.6B	$6.0B	$6.4B	$6.6B	$7.2B
- Capex	$5.8B	$6.0B	$6.0B	$5.9B	$5.9B
- Δ NWC	$671M	$442M	$162M	$242M	$379M
Free Cash Flow	$17.9B	$20.1B	$21.8B	$22.9B	$25.1B
Discount Factor	0.915	0.765	0.640	0.536	0.410
Present Value	$16.4B	$15.4B	$13.9B	$12.2B	$10.3B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$25.1B

Terminal Growth Rate3.00%

WACC9.32%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$409.9B

PV of Terminal Value$168.1B

Exit Multiple Method

Year 10 EBITDA$37.8B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$832.2B

PV of Terminal Value$341.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$134.5B

PV of Terminal Value$168.1B

Enterprise Value$302.6B

(-) Net Debt$39.2B

Equity Value$263.4B

Shares Outstanding1.8B

Price per Share$146.03

Exit Multiple Method

PV of Projected FCFs$134.5B

PV of Terminal Value$341.4B

Enterprise Value$475.9B

(-) Net Debt$39.2B

Equity Value$436.7B

Shares Outstanding1.8B

Price per Share$242.07

Pure Model Fair Value

$194.05

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.32%	$239.99	$247.19	$256.06	$267.25	$281.80
8.32%	$210.72	$215.34	$220.82	$227.44	$235.60
9.32%	$187.29	$190.42	$194.05	$198.30	$203.35
10.32%	$167.88	$170.09	$172.61	$175.49	$178.84
11.32%	$151.41	$153.03	$154.84	$156.88	$159.20

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$153.16

46.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.77

Base Case

$194.05

86.0% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.42

Bull Case

$236.78

127.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.21

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Communication Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth7.11%

Year 3 Revenue Growth4.19%

Year 5 Revenue Growth1.42%

Year 7 Revenue Growth2.05%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin23.54%

Tax Rate21.00%

Historical Capex / Rev5.70%

Terminal Capex / Rev4.50%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 22x EV/EBITDA (Communication Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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