Aswath Damodaran 539
Is Disney fairly valued?
! Based upon the PE ratio, is Disney under, over or correctly valued?
# Under Valued
# Over Valued
# Correctly Valued
! Based upon the PEG ratio, is Disney under valued?
# Under Valued
# Over Valued
# Correctly Valued
! Will this valuation give you a higher or lower valuation than the discounted
cashflow valuation?
# Higher
# Lower
If we assume that all of the firms in this sector have similar growth, risk and
payout characteristics, Disney is under valued, because its PE is lower than the
industry average.
On a PEG ratio basis, if we assume that all firms in this sector have similar risk
and payout characteristics, Disney is also under valued.
It is tough to say. It depends upon whether the DCF valuation is making
reasonable assumptions and whether the market, on average, is pricing these
firms correctly.
