Key Takeaways:
- AMC Entertainment (AMC) has been on Zacks.com’s list of the most searched stocks, with a -7% return over the past month.
- The company’s future direction is uncertain, with a Zacks Rank #3 (Hold) rating.
- AMC Entertainment is expected to post a loss of $0.06 per share for the current quarter, with a year-over-year change of +66.7%.
- The company’s revenue growth is crucial, with a consensus sales estimate of $1.39 billion for the current quarter, indicating a year-over-year change of +6.2%.
- AMC Entertainment’s valuation is graded C, indicating that it is trading at par with its peers.
Introduction to AMC Entertainment
AMC Entertainment (AMC) has recently been on Zacks.com’s list of the most searched stocks, prompting investors to consider the key factors that could influence the stock’s performance in the near future. Over the past month, shares of this movie theater operator have returned -7%, compared to the Zacks S&P 500 composite’s -0.2% change. During this period, the Zacks Leisure and Recreation Services industry, which AMC Entertainment falls in, has gained 4.4%. The key question now is: What could be the stock’s future direction?
Earnings Estimates and Stock Performance
While media releases or rumors about a substantial change in a company’s business prospects usually make its stock ‘trending’ and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making. At Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock. Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward.
AMC Entertainment’s Earnings Estimates
AMC Entertainment is expected to post a loss of $0.06 per share for the current quarter, representing a year-over-year change of +66.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged. The consensus earnings estimate of -$1.03 for the current fiscal year indicates a year-over-year change of +19.5%. This estimate has remained unchanged over the last 30 days. For the next fiscal year, the consensus earnings estimate of $0.42 indicates a change of +59.5% from what AMC Entertainment is expected to report a year ago. Over the past month, the estimate has remained unchanged.
Zacks Rank and Stock Rating
Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, AMC Entertainment is rated Zacks Rank #3 (Hold). The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate.
Revenue Growth and Financial Health
Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company’s potential revenue growth is crucial. In the case of AMC Entertainment, the consensus sales estimate of $1.39 billion for the current quarter points to a year-over-year change of +6.2%. The $4.95 billion and $5.22 billion estimates for the current and next fiscal years indicate changes of +6.7% and +5.6%, respectively.
Valuation and Investment Decision
Without considering a stock’s valuation, no investment decision can be efficient. In predicting a stock’s future price performance, it’s crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company’s growth prospects. Comparing the current value of a company’s valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is. AMC Entertainment is graded C on this front, indicating that it is trading at par with its peers.
Conclusion
The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about AMC Entertainment. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term. Investors should consider the company’s earnings estimates, revenue growth, and valuation before making an investment decision. With the right information and analysis, investors can make informed decisions and potentially benefit from the stock’s future performance.
