Historically, the S&P500 index has produced an annual return of about 10%. However, over the past five years, earnings have grown tremendously, representing an annual return of about 15%. It is reasonable to expect a reversion to the mean at some point.

But investors still have the opportunity to make huge gains by focusing on the right companies. In fact, there’s one crashed stock, currently trading 57% below its all-time high, that I believe can double your money over the next five years.

The struggles are hard to ignore

While I am optimistic Disney (DIS 0.57%)The last few years of this company are a case study in strategic missteps. I can identify three key areas that investors need to be aware of.

For one, Disney spent a whopping $71.3 billion to acquire 21st Century Fox’s film and television assets. The deal closed in early 2019. While the company gained valuable content, a significant portion of the deal’s revenue came from traditional cable television, a dying market. And Disney’s debt increased by $19.2 billion. Balance sheet.

The other mistake has to do with streaming. Disney+ only launched in November 2019. Although the company has been rapidly adding subscribers over the past five years and now has 118.3 million subscribers in total (excluding Hotstar), CEO Bob Iger and his team should have realized several years before 2019 that the industry was changing and streaming was taking over.

Another cause for concern is musical chairs at the top. Iger resigned from his position as CEO in February 2020, only to return in November 2022. Disney appears to be struggling to come up with a viable succession plan.

The negative developments I have just described, which make the outlook more uncertain, make it easy to understand why the market is pessimistic. Adding fuel to the fire is the fact that both the S&P 500 and a top competitor in Netflixhave delivered positive investment returns since Disney hit its peak price in March 2021.

The future looks bright

Investors should understand and accept the challenges Disney faces, but if you worry less about the next quarter or even year and instead focus your attention on the next five years or more, there is a lucrative buying opportunity here.

In the 2020 financial year, the company recorded a diluted earnings per share (EPS) loss of $1.58, a low point. Since then, there has been a significant improvement, with adjusted diluted EPS of $3.76 in fiscal 2023 and $5.56 on an annualized basis in Q3 2024. And I believe this will continue as the streaming operations are now operating positive and management is focused on cost reductions.

Don’t forget that the traditional networks and the experience segment (parks, cruises, consumer goods) have excellent operating margins of 37% and 26% respectively.

Disney also deserves credit for consistently paying down its debt. As of June 29, the company had $47.6 billion in debt on its balance sheet, significantly less than it had a few years ago. With projected free cash flow of $8 billion in fiscal 2024, which would be 63% higher than last fiscal year, the company is on the right track.

Benefit from the evaluation

Disney’s shift to streaming has been painful so far, as the company must continue to drive growth in direct-to-consumer while leveraging its linear networks as best it can. But I’m optimistic it can maintain positive earnings with its legacy business while working to expand its DTC margin. Last quarter was a good first step.

Investors can rest assured that Disney has Economic divide to protect its competitive position. I do not believe that the company’s intangible assets, namely its brand and intellectual property, can be reproduced. This is a unique company.

Since the market hates uncertainty, it’s understandable why Disney shares have crashed. With clear growth on the horizon, analyst consensus estimates call for adjusted diluted earnings per share to grow 16% annually between now and fiscal 2029. I don’t think it’s too much to ask that this pace continues after that. The current share price is less than 11 times the fiscal 2029 adjusted diluted earnings per share forecast of $7.90. Assuming Disney achieves the current 23 times the S&P 500, investors see a clear path to a doubling of the share price.