Apple Inc. (AAPL)vs The Walt Disney Company (DIS)

Quick verdict

Apple at $4.49 trillion and Disney at $185.6 billion are separated by a factor of roughly twenty-four in market value, and by rather less in valuation multiple: 34.92 times trailing earnings against 21.99. Disney is the cheaper stock on every measure, but it is also the weaker business on every profitability measure, earning a 6.43% return on invested capital against Apple's 51.87%. Our framework scores Disney 3.5 and Apple 2.5, awarding Disney valuation, growth and income while Apple takes quality and the balance sheet. Momentum is too close to call, which understates a real divergence: Apple returned 31.11% over the past year while Disney lost 8.39%.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Disney operates in Entertainment within Communication Services, spanning parks, studios and streaming; Apple sits in Consumer Electronics within Technology. Disney's 37.6% gross margin against Apple's 48.65% reflects the cost of producing content and running physical attractions, neither of which scales the way software does. The 16% operating margin against Apple's 33.17% shows how much of that gross profit is consumed before it reaches operating income. Disney's beta of 1.4 exceeds Apple's 1.09, and its worst five-year drawdown of 57.33% against Apple's 33.43% confirms it has been the more volatile holding. Parks and studios are discretionary consumer spending, which makes Disney more cyclical than a company selling devices on upgrade cycles.

Valuation

Disney is cheaper across the board. It trades at 21.99 times trailing earnings against Apple's 34.92, 1.88 times sales against 9.63, 1.69 times book against 41.81, and 9.75 times EV/EBITDA against 26.93. The EV/EBITDA comparison is the most useful of these, since it strips out capital structure and depreciation policy, and Apple commands nearly three times Disney's multiple. Disney's free-cash-flow yield of 4.47% also beats Apple's 3.04%. The question a buyer has to answer is whether Disney's discount reflects a temporarily depressed earnings base that will recover, or a permanent reassessment of what a legacy media business is worth in a streaming market.

Growth profile

Our framework awards growth to Disney, but the underlying figures need care. Disney's revenue has compounded at 3.35% over three years against Apple's 6.43%, so on the top line Apple is the faster grower. Disney's reported three-year EPS growth of 152.94% is what drives the verdict, and that figure comes from recovering off a heavily depressed base rather than from sustained expansion. Percentage growth measured from a low starting point is arithmetically large and tells you little about the future. On the evidence we would trust, revenue, Apple is growing roughly twice as fast, and neither company is expanding at a rate that would ordinarily justify a premium multiple.

Profitability and quality

Apple wins this factor comfortably. Its 33.17% operating margin is more than double Disney's 16%, and its 27.62% net margin more than triples Disney's 8.7%. Return on invested capital is 51.87% against 6.43%, and return on equity 137.18% against 7.87%. The ROIC comparison is the one to weigh, since Apple's ROE is inflated by an equity base reduced by buybacks. Above roughly 15%, return on invested capital signals a durable competitive advantage; Disney's 6.43% sits well below that threshold, which reflects the capital intensity of parks and content production rather than any failure of execution. Disney owns extraordinary intellectual property but converts it into profit far less efficiently.

Balance-sheet risk

Apple has the safer balance sheet. Disney carries net debt at 1.76 times EBITDA against Apple's 0.27, and its current ratio of 0.71 means current assets cover only about seven-tenths of near-term liabilities, against Apple's 1.00. Disney's interest cover of 9.18 times is adequate rather than comfortable. None of this suggests distress, and a business with Disney's recurring park and licensing revenue can carry moderate leverage safely. But the difference is real: Apple could fund a significant downturn from its own balance sheet, while Disney has less room before it would need to prioritise between capital spending, debt reduction and its dividend.

Price performance and shareholder returns

Apple has been the better holding by a clear margin. It returned 31.11% over the past year while Disney lost 8.39%, and annualised 19.74% over three years against Disney's 6.89%. Year to date Apple is up 12.89% while Disney is down 4.47%. Disney has also been the more volatile of the two, with a 57.33% worst five-year drawdown against Apple's 33.43%. On income Disney yields 1.4% against Apple's 0.35%, on a 25.99% payout ratio against 12.13%, so Disney returns roughly four times as much cash relative to price. That is the one dimension on which Disney has outperformed. Past performance never guarantees future results.

Which stock fits which investor

Value investors will find Disney the better fit, cheaper on every multiple reported and with a higher free-cash-flow yield. Income investors should also prefer Disney, whose 1.4% yield is four times Apple's 0.35%, though neither is a serious income holding. Investors who prize quality at a reasonable price will favour Apple decisively: a 51.87% return on invested capital against 6.43% is not a marginal difference. Growth investors get an ambiguous signal, since Disney wins the factor on an earnings figure distorted by a low base while Apple grows revenue nearly twice as fast. The clearest framing is that Disney is a recovery story trading at a discount, and Apple is a proven compounder trading at a premium.

• Value: DIS
• Growth: DIS
• Income: DIS
• Quality: AAPL

Frequently asked questions

Is Apple or Disney the better buy right now?

Disney scores 3.5 on our six-factor framework and Apple 2.5, winning valuation, growth and income while Apple takes quality and the balance sheet. But Apple returned 31.11% over the past year while Disney lost 8.39%, and Apple's returns on capital are several times higher.

Which stock is cheaper, AAPL or DIS?

Disney, on every measure. It trades at 21.99 times trailing earnings against Apple's 34.92, 9.75 times EV/EBITDA against 26.93, and 1.69 times book against 41.81. Its free-cash-flow yield of 4.47% also exceeds Apple's 3.04%.

Why is Disney's reported EPS growth so high?

Disney's three-year EPS CAGR of 152.94% comes from recovering off a heavily depressed earnings base rather than sustained expansion. Percentage growth measured from a low starting point is arithmetically large and says little about future prospects. Its revenue growth of 3.35% is the more reliable indicator.

Which pays the better dividend?

Disney, at 1.4% against Apple's 0.35% — roughly four times as much — on a 25.99% payout ratio against Apple's 12.13%. Neither yield would satisfy an income-focused mandate, but Disney returns considerably more cash relative to its share price.

Which company is more profitable?

Apple, by a wide margin. Its operating margin is 33.17% against Disney's 16%, its net margin 27.62% against 8.7%, and its return on invested capital 51.87% against 6.43%. Disney's capital intensity in parks and content production caps its returns structurally.

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