Outline

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Outline

• Background Analysis
• Marvel History Products
• Financial Ratios
• Holding Period Return
• Board of Directors
• Free Cash Flow Cost of Equity
• Free cash flow 2002, 2003 2004
• Discounted Cash Flow Model (DCF)
• Market Efficiency
• Marvel Specific News
• Marvel Non-specific News

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Outline

• Risk Analysis
• Stock Beta
• Unlevered Beta
• Cost of Equity
• Cost of Capital Optimal Capital Structure
• WACC for 2002, 2003 2004
• Capital structure
• Strength and Weaknesses
• Conclusions

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The History

• Marvel is one of the world's most prominent
  character-based entertainment companies, with a
  proprietary library of over 4,700 characters.
• Founded in the 1930s, its first major publication
  was Marvel Comics 1 in 1938.
• In the 1950s Marvel fell on dark times, along
  with the rest of the industry. In this decade
  the company was generally known as Atlas Comics.

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Marvels Products
Licensing
Toy Merchandise
Publishing
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Marvels Products

• LICENSING
• Feature Films
• The Company currently has licenses with Sony
  Pictures to produce motion pictures featuring
  Spider-Man, Ghost Rider and Luke Cage
• With Twentieth Century Fox to produce motion
  pictures featuring X-Men, The Fantastic Four and
  Silver Surfer.
• One Daredevil film was released during February
  2003 and a spin-off based on the Elektra
  character is presently scheduled to be released
  in 2005.
• Television Programs
• Marvel Licensing began production of X-Men
  Evolution, a half-hour animated show that is
  distributed by Warner Brothers and currently
  appears on the WB Kids! network and on foreign
  television stations.
• Destination-Based Entertainment
• Marvel has licensed the Company's characters for
  use as part of the Islands of Adventure theme
  park at Universal Orlando in Orlando, Florida.
• Live shows at Universal Studios Hollywood
• A Spider-Man attraction at the Universal Studios
  theme park in Osaka, Japan. In addition.

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Marvels Products

• TOY MERCHANDISE
• In July 2001, the Company entered into a 5½ year
  exclusive licensing agreement with an unrelated
  Hong Kong company, Toy Biz Worldwide, Ltd
  (TBW), for the sale and manufacture of toy
  action figures and accessories, and certain other
  toys, that feature Marvel characters other than
  those based upon movies or television shows
  featuring
• Spider-Man and produced by Sony Pictures. TBW is
  licensed to use the Toy Biz name for marketing
  purposes

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Marvels Products

• Publishing
• Marvel Publishing has been publishing comic books
  since 1939.
• Marvel Publishing's comic book publications are
  distributed by
• to comic book specialty stores on a
  non-returnable basis (direct market)
• to traditional retail outlets, including
  bookstores and newsstands, on a returnable basis
  (mass market)
• on a subscription sales basis.
• Marvel Publishing's primary target market for its
  comic books has been male teenagers and young
  adults in the 13 to 23 year old age group.

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Growth Rate
Good in growth rate percentages
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Sale Price Ratios
STRENGTH in sale price ratios
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Profit Margins
STRENGTH in profit margins percentages
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Financial Condition
STRENGTH in Financial Condition
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Investment Returns
VERY STRONG INVESTMENTS RETURNS
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Management Efficiency
Overall Management Efficiency is Good
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Financial Ratios Conclusion

• Based on Marvels ratios
• Overall, we think this company has strength!

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Board of Directors
Stan Lee Creator of Spider Man
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Officer Compensation

• Total Annual Compensation

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Holding Period Returns
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Free Cash Flow to Equity
Marvel has desirable free cash flows
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Discounted Cash Flow
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Market Efficiency
Company Specific News
4/23/03
This is an example of Weak Form, MVL stock here
gradually increases, but then decreases even
lower after announcement date.
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Market Efficiency
Non Company Specific News
This is an example of the Weak Form, MVL stock
here gradually increases to reflect the effect
interest rates will have on MVL.
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Risk Analysis
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CAPM
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Cost Of Capital
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Capital Structure
In 2004, debt was reduced (and equity increased)
because of Marvels repayment of all long term
debt obligations. As of June 16, 2004 Marvel
Enterprises is debt free with cash in excess of
150 million. Also in 2004, Marvel authorized a
repurchase program, authorizing the buyback of
100 million dollars worth of MVL shares.
GOOD Debt Ratio
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MM Propositions
Marvel falls into a no form category after
looking at the three data points given.
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Strength Weaknesses

• STRENGTH
• Profit Margin
• Financial Condition
• Investment Returns
• Management Efficiency
• Positive HPR

• WEAKNESSES
• Earnings per Share
• P/E Ratio
• Beta Fluctuation
• Net Income Fluctuates

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Conclusion

• HPR Strength
• Financial Ratios Strength
• Under-priced Strength
• Debt Ratio (low) Strength

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Analyst Recommendations