December 14, 2004  Email this 
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Marvel Enterprises: Heroic Capital
Marvel Enterprises (MVL) rules a kingdom of 4,700 characters, including Spider-Man, the X-Men and the Incredible Hulk. Today, comic publishing is the smallest of its three business units. The big money comes from licensing the rights to its stable of superheroes to Hollywood studios, toymakers and others. Because Marvel owns all the characters, licensing revenue is almost pure profit. Movie studios shoulder the film-production costs, and Marvel gets a percentage of the box-office and DVD sales. Similarly, Marvel leaves the toy manufacturing to others and collects the royalties.
With headquarters in New York City, the company has only about 200 employees but will bring in an estimated $468 million in revenues this year, thanks in large part to Spider-Man 2.
As Marvel's slate of film releases grows, box-office and toy revenues will become more predictable. Movies featuring the Fantastic Four and Elektra are due in 2005.
Over the past year, Marvel produced $177 million in free cash. The company's growing success allowed it to pay off its debt in June, and it expects to have $200 million in cash by year-end. Half of that amount has been earmarked for share repurchases.
The growing cash hoard could inspire Marvel to initiate a dividend, says Robert Routh, an analyst at investment bank Jefferies. He rates the shares a buy, with a one-year target price of $22.
--David Landis
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