Should You Pick Disney Over UPS Stock?

Core Viewpoint - Disney stock (NYSE: DIS) is considered a better investment choice compared to UPS stock (NYSE: UPS) due to its superior revenue growth and profitability, despite both companies having similar revenue bases of around $90 billion [1]. Group 1: Stock Performance - Both UPS and Disney have underperformed the broader markets over the last three years, with UPS declining 20% from $170 to $135 and Disney declining 45% from $180 to $100, while the S&P 500 increased by approximately 45% during the same period [2]. - UPS's stock returns were inconsistent, with a 27% increase in 2021, followed by declines of 19% in 2022 and 10% in 2023. Disney's returns were -15% in 2021, -44% in 2022, and a slight recovery of 4% in 2023 [2]. Group 2: Revenue Growth - Disney's average annual revenue growth rate over the last three years is 11%, significantly higher than UPS's 3% [4]. - UPS's revenue increased from $84.6 billion in 2020 to $90.6 billion in 2023, driven by e-commerce growth, but has recently slowed due to weakening consumer spending [4]. - Disney's revenue grew from $65.4 billion in 2020 to $88.9 billion in 2023, supported by a rebound in theme park attendance and increased streaming revenues [5]. Group 3: Profitability and Financial Risk - Disney's operating margin improved from 6% in 2020 to 11% in the last twelve months, while UPS's margin increased from 9% to 10% but has been trending downward due to rising operational costs [6]. - In terms of financial risk, UPS has a lower debt-to-equity ratio of 21% compared to Disney's 25%, and a higher cash-to-assets ratio of 9% versus Disney's 7% [6]. Group 4: Valuation and Future Prospects - The estimated valuation for UPS is $163 per share, indicating a potential upside of around 20% from its current price of $135, based on a 20x P/E multiple [7]. - Disney's estimated valuation is $137 per share, reflecting over 35% upside from its current market price of $100, supported by strong demand for its streaming and theme park businesses [7].