Ownership of the rights to a cultural icon equals promotion. It's a simple equation found in any basic text on marketing. Ownership of the rights to several icons equals big business is a corollary that has been successfully applied by an outfit headquartered in New York.
Marvel Entertainment (NYSE: MVL) is engaged in the marketing of a library of some 5,000 fictional characters, including Spider-Man, The Incredible Hulk, Captain America, The Fantastic Four and X-Men. The firm's Licensing segment sells the rights to use the characters in marketing toys, apparel, video games and films. The Publishing division sells character-based comic books to the mass market. The Toys unit develops and markets character-based toys. The Film Production segment produces and distributes character-based films. Mattel (NYSE: MAT) and Walt Disney (NYSE: DIS) are competitors.
Marvel pleased investors early this week, when it reported Q3 EPS of 45 cents and revenues of $123.6 million. Analysts
had been expecting 28 cents and $90.5 million. Management also guided FY07 EPS to $1.60-1.65 ($1.44 consensus), FY07 revenues to $455-475 million ($431.79M consensus) and FY08 EPS to $1.30-$1.50 ($1.26 consensus). MVL shares popped on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys," three "buys" and nine "holds." Analysts see a 19% average annual growth rate, through the next five years. The MVL PEG ratio (0.96), Price to Cash Flow ratio (13.90), Sales Growth rate (34.06%), EPS Growth rate (181.25%), Operating Margin (53.36%), Net Profit Margin (31.88%), Return on Assets (21.41%), Return on Investment (33.02%), Return on Equity (66.03%), Revenue per Employee ($1.78M) and Net Income per Employee ($566.23k) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 83% of the outstanding shares. Over the past 52 weeks, the stock has traded between $21.21 and $30.95. A stop-loss of $23.15 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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