Marvel Entertainment’s - Bull Of The Day

Marvel Entertainment’s (MVL) business model of leveraging its library of more than 5,000 trademarked and often ubiquitous characters across 3 businesses comic books, toys and films while putting little capital at risk has proven lucrative, generating operating margins and ROE averaging 56% and 37%, respectively, from 2003 to the present. We expect EPS to fall by nearly 50% in 2009, but recover in 2010 to eclipse 2008 levels, driven by the timing of the company’s film slate.

The newly-launched film production unit has performed very well thus far, producing two high grossing films in 2008. One-to-two films a year are planned for 2010 and beyond, which we think can contribute to high-teens average EPS growth over the long-term.

In the meantime, MVL appears relatively resilient to the recession, with single digit revenue declines expected in 2009 in the licensing division impressive during a recession and in a year with no film openings — while the film segment’s earnings will hinge more on the popularity of its releases than on the economy, as movies are inexpensive entertainment.

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