Marvel Enterprises (MVL)

With no less that 3 major blockbuster films scheduled from now till mid summer based on popular comic book characters. The twist here is that Marvel Entertainment (MVL), after years of seeing the movie business capitalize and profit substantially on successful comic adaptations, isn't standing on the sidelines anymore. Now instead of licensing popular characters to the major movie studios and watching them collect profits from ever rising ticket prices, DVD sales, Rentals, iTunes revenue etc. Marvel put it's hand in the cookie jar and decided to start financing its own movies.

And Marvel studios was born. With the first creation being the expected successful movie career of Iron Man. This means that Marvel will be in a position to keep a much larger percentage of the profits than it has from its other movies.

The company's bold business model change years ago is bound to pay substantial dividends down the road as the worldwide box-office presents Marvel with a untapped resource of revenue. Their attention to the history of their own character creations will likely provide a movie platform that the outside studios could not and should provide years of additional story and movie script ideas. Marvel is set this summer with Iron Man and its second film The Incredible Hulk and if these prove to be as successful as most expect, then Marvel Studios will certainly expand and become a major player in the land of Hollywood.

Marvel will be releasing it’s first independently produced major motion picture next year, Ironman. This means that Marvel will be in a position to keep a much larger percentage of the profits than it has from its other movies.

Management is good. Issac Perlmutter has been CEO since 2005, with the company since before it's pre-bankruptcy days in 1993. He owns over 34% of the common shares - a huge stake that aligns his interests with shareholders'. Salaries are reasonable and the company grants no stock options

The company holds a $525 million dollar credit facility with which to finance their film production, from which about $250 million is drawn. Interest coverage is a more than acceptable 20 times. Historical free cash flow margin is over 35%, although 2007 was cash flow negative due to ramp up of the film studio. Free cash flow margin should return to mid 20-s levels, assuming feature films are moderately successful.

Marvel runs an attractive business. It's primary bankable assets are intellectual, and hard to duplicate with their wide recognition and history. The decision to produce films seems poorly timed, as their most recognizable characters already have had their big payday at the box office (Spider-Man, X-Men, and Fantastic Four), and several second tier properties as well (Daredevil, Blade, Ghost Rider). The only top tier character they plan to produce is the Hulk, and he's already had one flop. Looking over the list, the only well known character is Captain America. The price looks cheap now, but that's on the heels of Spider-Man 3, and the web slinger is on the shelf for a while. Marvel is probably appropriately valued given what's known right no