Walt Disney  (DIS) - Get Report is the globe's best-known media and entertainment behemoth, sporting a brand name that's been universally beloved ever since Mickey Mouse made his debut in the black-and-white-cartoon Steamboat Willie in 1928. The empire that Uncle Walt built is scheduled to release its operational report for the fourth quarter and 2015 fiscal year, after the market closes on Thursday.

Should you buy ahead of earnings? The answer is a resounding yes. Below, I explain why.

Disney's upward trajectory so far this year doesn't necessarily spell a happy Hollywood ending for the media sector in general. Many of the company's competitors -- notably Time Warner, Twenty-First Century Fox and Viacom -- are experiencing inexorable declines in core businesses, such as cable TV and paid programming segments.

So if you're looking to invest in media stocks, it's essential to be selective and stick with the leaders, and the undisputed leader right now is Disney.

Disney got its start in conventional media, but the company has positioned itself to not only survive but also thrive in the digital era.

Disney boasts several strengths that most media companies would envy. Chief among them is diversity. The company operates in a wide range of businesses, including theme parks, TV stations, retail stores and cruise lines.

The company's biggest source of revenue (45% in the latest quarter) derives from the media networks division, which owns the ABC television network and several popular cable channels, including ESPN, ABC Family, the Disney Channel and A&E.

What's more, Disney owns the rights to some of the most beloved and popular films in cinematic history, constituting a portfolio of intellectual property that will continue generating revenue for decades to come.


Disney's margins grew in the previous quarter, as did the hoopla over its forthcoming Star Wars film, which is already garnering praise from the franchise's hard-to-please fans. What's more, the stock is now up 21.73% year to date, a nice rebound from the hit it took in the previous quarter after management stated that it expects a decline next year in the number of subscribers to its ESPN division.

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DIS data by YCharts

Now that the investment herd's overreaction to ESPN's modest slump is in the past, you should keep your eyes on Dec. 18, when Star Wars: The Force Awakens hits multiplexes in what is sure to be a tsunami of ticket sales, with lucrative merchandising that pays in perpetuity.

At the same time, Disney's second-largest segment, parks and resorts, racked up year-over-year revenue growth of 4% in the previous quarter. Continuing economic recovery, combined with rising consumer sentiment, should ensure a continuation of that trend in the fourth quarter and into 2016.

The stock's trailing 12-month price-to-earnings ratio is a bit pricey at 23.8, compared with the trailing P/E of 18.6 for the diversified entertainment industry as a whole, but the modest premium is well worth it.

Disney is a buy, especially ahead of its earnings report on Thursday. But you should dump these dangerous stocks now. For a complete list of 29 stocks on the verge of collapse, click here.

John Persinos is editorial manager and investment analyst at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.