Walt Disney Co (DIS)

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Avoid These 3 Overvalued Stocks in the Dow Jones Industrial Average
By: StockNews | April 23, 2021

After rallying to a record high earlier this month, the Dow Jones Industrial Average (DJIA) declined 1.3% to close yesterday’s trading session at $33,815.90. Investors’ concerns over Biden’s proposed capital gains tax hike on the wealthy may have caused the index to lose some of its value. The proposal to almost double the capital gains taxes could lead to a further downtrend in the coming days.

In addition, the resurgence of COVID-19 cases in several parts of the world has kept investors on their toes. Amid this environment, we think it could be wise to avoid companies with declining financials and lofty valuations.

Some DJIA stocks have been suffering significant losses, and their premium valuations do not justify their financial performance or growth prospects. Hence, we think it’s best to avoid overvalued stocks The Walt Disney Company (DIS), Chevron Corporation (CVX), and The Boeing Company (BA) for now.

The Walt Disney Company (DIS)

DIS needs no introduction. The leading diversified international family entertainment and media enterprise operates Disney Parks, Experiences and Products, Disney Media & Entertainment Distribution, and three content groups: Studios, General Entertainment and Sports that are focused on developing and producing content for direct-to-consumer (DTC), theatrical and linear platforms.

In December, DIS surpassed 137 million paid subscriptions across its DTC services, which included 11.50 million ESPN+ subscribers, 38.80 million Hulu subscribers and 86.80 Disney+ subscribers since its launch in November 2019. The company plans to increase its content output in the coming years, which should improve its performance. .

DIS’ forward P/E currently stands at 92.91x, which is 357.5% higher than the industry average 20.31x. The company’s trailing-12-month EV/EBIT of 331.01x is 1609.8% higher than the industry average 19.36x.

DIS’s net income from continuing operations declined by 99% year-over-year to $29 million in its fiscal first quarter ended January 2, 2021. Its revenue declined 22% from its year-ago value to $16.25 billion, while its segment operating income declined 67% year-over-year to $1.33 billion over this period. The company’s EPS decreased 98% from its year-ago value to $0.02.

A $0.27 consensus EPS estimate for current quarter, ended March 2021, represents a 55% decline year-over-year. The $15.85 billion consensus revenue estimate for the current quarter represents a 12% decrease from the same period last year. The stock has declined 5.2% over the past month.

DIS’ POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which translates to Sell in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

DIS is also rated a D in Growth, Value, and Quality. Within the F-rated Entertainment – Sports & Theme Parks industry, it is ranked #3 of 13 stocks...

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