At the Movies: DreamWorks Animation Vs. Universal Pictures Vs. Disney
When it comes to stock appreciation, DreamWorks Animation has outperformed Comcast -- owner of Universal Pictures -- and Disney year to date by wide margins. DreamWorks Animation has seen stock appreciation of 90.16%, whereas Comcast's and Disney's stocks have appreciated 27.02% and 36.75%, respectively. With recent movies like Turbo, Rise of the Guardians, and The Croods performing well at the box office, this stock appreciation is somewhat justifiable.
Let's take a look at recent box office performances as well as some fundamental comparisons for these three companies.
Box office results
Source: http://www.dreamworksanimation.com/movies
It's amazing how, despite a weak economy with a hesitant consumer, demand for movies remains high. Granted, the box office results below are for worldwide sales, but these movies didn't perform poorly domestically. This trend proves that as long as a movie's marketing is good and its quality leads to positive online reviews and word of mouth, a profit is likely. Therefore, in a way, these companies are capable of printing money at will ... as long as they don't get sloppy.
Below are worldwide box office results for recent releases from DreamWorks Animation, Universal Pictures, and Disney.
DreamWorks Animation:
Budget | Worldwide Box Office Sales | |
|---|---|---|
Turbo | $135,000,000 | $274,284,441 |
Rise of the Guardians | $145,000,000 | $306,900,902 |
The Croods | $135,000,000 | $573,068,425 |
Universal Pictures:
Budget | Worldwide Box Office Sales | |
|---|---|---|
Despicable Me 2 | $76,000,000 | $914,791,226 |
Fast & Furious 6 | $160,000,000 | $788,015,019 |
Riddick | $38,000,000 | $92,425,135 |
Disney:
Budget | Worldwide Box Office Sales | |
|---|---|---|
Planes | $50,000,000 | $219,116,868 |
Monsters University | $200,000,000 | $742,597,037 |
Oz: The Great and Powerful | $200,000,000 | $489,570,996 |
Note: Oz: The Great and Powerful has so-far generated $46,007,939 in home entertainment sales.
Take a good look at the numbers above. All nine movies were profitable, some of them immensely profitable. Now consider moviegoer ratings at IMDb (one to 10 with 10 being highest) and Rotten Tomatoes ratings:
DreamWorks Animation:
IMDb | Rotten Tomatoes | |
|---|---|---|
Turbo | 6.3 | 67% |
Rise of the Guardians | 7.2 | 81% |
The Croods | 7.3 | 79% |
We can call it two out of three, with Rise of the Guardians and The Croods pleasing audiences more than Turbo.
Universal Pictures:
IMDb | Rotten Tomatoes | |
|---|---|---|
Despicable Me 2 | 7.6 | 85% |
Fast & Furious 6 | 7.2 | 84% |
Riddick | 6.7 | 59% |
Universal Pictures' trio of recent movie releases is slightly more impressive than DreamWorks Animation from an audience reaction standpoint. Now let's see how Disney compares.
Disney:
IMDb | Rotten Tomatoes | |
|---|---|---|
Planes | 5.3 | 52% |
Monsters University | 7.5 | 83% |
Oz: The Great and Powerful | 6.5 | 58% |
Planes was an obvious attempt at trying to capitalize on the success of Cars, but it didn't live up to expectations. Oz: The Great and Powerful had to live up to even higher expectations, as it's often compared to The Wizard of Oz.
Overall, it looks as though Comcast's Universal Pictures has been the most impressive when it comes to movie releases as of late. Let's take a look at some other comparisons.
Smaller companies need consistent top-line growth
DreamWorks is tiny compared to Comcast and Disney. DreamWorks Animation has a market cap of $2.63 billion versus a market cap of $122.51 billion for Comcast and a market cap of $122.45 billion for Disney. Keep in mind that Comcast and Disney have various revenue streams that include broadcast television, theme parks, and more.
A smaller company can still be considered for an investment over its larger peers, but only if it's growing at a rapid rate compared to those peers. That's not the case here. Consider top-line performances for these three companies over the past year:
DWA Revenue (TTM) data by YCharts
Disney has been the most consistent, very impressive considering Disney's maturity. Also consider key metric comparisons:
Forward P/E | Profit Margin | ROE | Dividend Yield | Debt-to-Equity Ratio | |
|---|---|---|---|---|---|
DreamWorks Animation | 35 | (5.84%) | (3.15%) | N/A | 0.22 |
Comcast | 16 | 10.09% | 11.90% | 1.10% | 0.30 |
Disney | 15 | 13.62% | 14.73% | 1.60% | 0.91 |
DreamWorks has pumped out some winning movies recently, and there's a pretty good chance this will continue. On the other hand, DreamWorks Animation has been inconsistent on both the top and bottom lines. This isn't a good combination for a company that's trading at a lofty 35 times forward earnings. Expectations seem too high. This is an addition to a lack of dividend payments. Comcast and Disney are more fundamentally sound, more diversified, possess superior marketing power and expansion opportunities, and they both pay decent dividends.
The bottom line
DreamWorks Animation's stock might continue to outperform the stocks of its larger peers for a considerable amount of time. Also, the long-term risk-to-reward isn't bad. However, DreamWorks Animation has to improve at cutting costs. Comcast and Disney are likely to present safer long-term investments which still offer growth potential. Also, if these stocks underperform, there are dividend payments to collect.
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The article At the Movies: DreamWorks Animation Vs. Universal Pictures Vs. Disney originally appeared on Fool.com.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends DreamWorks Animation and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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