AMC Entertainment (AMC) has been one of the most searched stocks on Zacks.com in recent times. You may want to look at some of the facts that could shape the stock’s performance in the short term.
Shares of this movie theater operator have returned -19.2% over the past month, compared with a change of -0.4% in the Zacks S&P 500 composite. The Zacks Entertainment and Leisure Services industry, which owned by AMC Entertainment, lost 1.4% over this period. Now the key question is: where could the stock be headed in the near term?
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 expectations. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
We essentially look at how the sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates rise for a company, the fair value of its shares rises. A fair value above the current market price attracts investor interest in purchasing the stock, causing its price to rise. This is why empirical research shows 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 $0.19 per share, a change of +64.8% from the year-ago quarter. The Zacks Consensus Estimate has remained unchanged over the past 30 days.
The consensus earnings estimate of -$0.97 for the current fiscal year indicates a year-over-year change of +59.1%. This estimate has changed by +0.9% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of -$0.57 indicates a change of +41.8% from what AMC Entertainment was expected to report a year ago. Over the past month, the estimate has changed by -4.2%.
Backed by a strong external audit history, our proprietary stock rating tool, the Zacks Rank, provides a more conclusive picture of a stock’s near-term price direction because it effectively harnesses the power of revisions to earnings estimates. Due to the size of the recent change in the consensus estimate, as well as three other factors related to earnings estimates, AMC Entertainment has a Zacks Rank #3 (Hold).
The chart below shows the change in the company’s 12-month consensus EPS estimate:
Although profit growth is arguably the most reliable indicator of a company’s financial health, nothing as such happens if a company is unable to grow its revenue. After all, it’s almost impossible for a company to grow profits over an extended period of time without growing revenue. It is therefore important to know a company’s potential revenue growth.
For AMC Entertainment, the consensus sales estimate for the current quarter of $1.27 billion indicates a year-over-year change of +15.3%. For the current and upcoming fiscal years, the estimates of $4.6 billion and $5.08 billion indicate changes of -4.3% and +10.3%, 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 #3 suggests that it could move in line with the broader market in the near term.
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