AMC Entertainment (AMC) recently made the Zacks.com list of most sought-after stocks. Therefore, you may want to consider some of 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 -8.4%, compared with a change of -2.2% for the Zacks S&P 500 Composite Index. During this time, the Services industry Zacks Entertainment and Entertainment, which includes AMC Entertainment, lost 7.1%. The key question now is: what could be the future direction of the stock?
While press releases or rumors about a substantial change in a company’s business prospects usually move its stock and lead to an immediate price change, there are always fundamental facts that end up dominating a company’s decision-making. purchase and storage.
Rather than focusing on anything else, at Zacks we prioritize evaluating the change in a company’s earnings forecasts. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
Our analysis primarily relies on how the sell-side analysts covering the stock are revising their earnings estimates to take into account the latest business trends. When a company’s earnings estimates rise, the fair value of its shares rises as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
For the current quarter, AMC Entertainment is expected to report a loss of $0.14 per share, a change of +74.1% from the year-ago quarter. The Zacks Consensus Estimate has remained unchanged over the past 30 days.
For the current fiscal year, the consensus earnings estimate of -$0.95 indicates a change of +59.9% from the prior year. Over the last 30 days, this estimate has changed by +24.5%.
For the next fiscal year, the consensus earnings estimate of -$0.43 indicates a change of +54.6% from what AMC Entertainment was expected to report a year ago. Over the past month, the estimate has changed by -24.5%.
With an impressive outside-audited track record, our proprietary stock rating tool – the Zacks Rank – is a more conclusive indicator of a stock’s near-term price performance because it effectively harnesses the power of estimate revisions. profits. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, resulted in a Zacks Rank #2 (Buy) for AMC Entertainment.
The chart below shows the change in the company’s 12-month consensus EPS estimate:
While a company’s earnings growth is arguably the best indicator of its financial health, not much happens if it can’t grow its revenue. It is almost impossible for a company to grow profits without increasing revenue for long periods of time. It is therefore crucial to know a company’s potential revenue growth.
In the case of AMC Entertainment, the consensus sales estimate of $1.29 billion for the current quarter indicates a year-over-year change of +16.4%. Estimates of $4.62 billion and $5.12 billion for the current and next fiscal years indicate changes of -4.1% and +11%, respectively.
AMC Entertainment reported revenue of $1.35 billion in the most recently reported quarter, representing a -4.1% year-over-year change. An EPS of -$0.04 for the same period, compared to -$0.09 a year ago.
Compared to the Zacks Consensus Estimate of $1.33 billion, the reported earnings came as a surprise of +1.2%. The EPS surprise was +42.86%.
Over the past four quarters, AMC Entertainment has exceeded consensus EPS estimates twice. The company topped consensus revenue estimates twice during that period.
No investment decision can be effective without taking into account the valuation of a security. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a determining factor in its future price performance.
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 current value. Own historical values help determine whether its shares are fairly valued, overvalued or undervalued, while comparing the company against its peers on these metrics gives a good idea of the reasonableness of its stock price.
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better that C; and so on), which makes it possible to identify whether a stock is overvalued, correctly valued or temporarily undervalued.
AMC Entertainment is rated C on this front, indicating that it is trading on par with its peers. Click here to see the values of some of the valuation metrics that led to this rating.
The facts discussed here and plenty of other information on Zacks.com could help determine whether it’s worth paying attention to the market buzz surrounding AMC Entertainment. However, its Zacks Rank #2 suggests that it could outperform the broader market in the near term.
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