Is Walt Disney's Stock Overvalued Or Undervalued?

$Walt Disney(DIS)$

Earnings: Disney's PE is 133.9, about 4.5 times higher than the S&P 500 average as a whole.

Growth: Disney's forward earnings multiple of 36.1 is still more than 50% higher than the S&P 500's, making Disney look overvalued.

Disney's forward PE ratio is also more than 50% higher than the average multiple of its communication services sector peers, which are averaging a 21.5 forward earnings multiple.

Yet when it comes to evaluating a stock, earnings aren't everything.

The growth rate is also critical for companies that are rapidly building their bottom lines. The price-to-earnings-to-growth ratio (PEG) is a good way to incorporate growth rates into the evaluation process.

The S&P 500's overall PEG is currently about 1.0; Disney's PEG is 3.14, suggesting Disney is still extremely overvalued after accounting for its growth.

Price-to-sales ratio is another important valuation metric, particularly for unprofitable companies and growth stocks. The S&P 500's PS ratio is currently 3.19, well above its long-term average of 1.63. Disney's PS ratio is 4.03, well above S&P 500 average as a whole.

Disney's PS ratio is also up 37.1% over the last five years, suggesting the stock is priced at the high end of its historical valuation range.