Comcast Corporation (CMCSA), Twenty-First Century Fox Inc (FOX): Why The Walt Disney Company (DIS)’s Magic Isn’t Gone

Twenty-First Century Fox Inc (NASDAQ:FOX) is very active in distributing animated movies for children, much like Disney. Fox did pretty well with Blue Sky Studios, the production house behind the Ice Age series. Fox distributed its first official Dreamworks animated movie,The Croods, around the time Disney’s Pixar studios was preparing for the release of Monsters University.

Twenty-First Century Fox Inc (NASDAQ:FOX)’s film studio, which generates about 20% of its operating profit, also benefits from the company’s worldwide distribution. Fox does have its own problems, though, particularly in the television business. Some of its most famous programs, like American Idol, have experienced dramatic decreases in viewership.

That being said, Twenty-First Century Fox Inc (NASDAQ:FOX) still has investment potential. Fox has one of the lowest price-to-earnings ratios in the industry at 10.4, well below Disney at 18.4. It’s also growing fast: Fox’s revenue growth (year to year) was, according to the latest earnings call, 15.67%–well above Comcast Corporation (NASDAQ:CMCSA) (6.96%) and Disney. The downside? With a 1.85 debt-to-equity ratio, the company is more leveraged than Disney or Comcast. The upside is that Fox intends to use $4 billion  for stock repurchases.

However, Twenty-First Century Fox Inc (NASDAQ:FOX)’s high exposure to cable network programming could become a threat in the long run. According to Fox’s annual reports, cable network programming provided 27% and 24% of consolidated revenues in fiscal 2012 and 2011, respectively. The company has managed to increase its affiliate and advertisement revenue so far, but strong competition from online streaming video alternatives could offset its future growth potential.

Final Foolish thoughts

Disney had a tough quarter because it had to deal with losses from The Lone Ranger. However, in the long run, the company’s ability to generate cash flow from its parks, its global brand, and its television channels (Disney TV, ESPN) remains intact. This may be a good entry point for investors with a long-term time horizon.

The article Why Disney’s Magic Isn’t Gone originally appeared on Fool.com and is written by Adrian Campos.

Fool contributor Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. 

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