We are definitely interested in long-term investments, but some companies are simply bad investments in any period of time. We really hate to see other investors lose their hard earned money. Anyone who held Lions Gate Entertainment Corp. (NYSE:LGF.A) for five years would be healing their metaphorical wounds as the stock price fell 80% in that time. And some of the more recent buyers are probably worried as well because the stock is down 55% in the last year. Shareholders have had an even tougher run of late, with the stock price plummeting 34% in the last 90 days. We note that the company has reported results quite recently; and the market is hardly delighted. You can check the latest figures in our company report.
After losing 9.8% last week, it’s worth digging into the company’s fundamentals to see what we can infer from past performance.
Our analysis indicates that LGF.A is potentially undervalued!
Since Lions Gate Entertainment has not made a profit in the last twelve months, we will focus on revenue growth to form a quick view of its business development. When a company is not making a profit, we generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one expects good top-line growth.
Over the past five years, Lions Gate Entertainment has seen its revenue decline by 3.8% per year. While far from catastrophic, that’s not good. The stock price drop of 12% (per year, for five years) is a stark reminder that companies that lose money are expected to increase their revenue. We’re generally averse to companies with declining revenues, but we’re not alone in that. The fear of becoming a ‘bagkeeper’ may be turning people away from this stock.
The graph below shows how earnings and revenue have changed over time (find out the exact values by clicking on the image).
It’s good to see that there have been some significant internal purchases in the last three months. That’s positive. That being said, we believe earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling shares of Lions Gate Entertainment, you should check this out free report showing analyst earnings forecasts.
a different perspective
We regret to report that Lions Gate Entertainment shareholders are down 55% on the year. Unfortunately, that’s worse than the overall market drop of 19%. However, it could simply be that the share price has been affected by general market jitters. It may be worth keeping an eye on the fundamentals, in case there is a good opportunity. Unfortunately, last year’s performance caps a losing streak, with shareholders facing a total loss of 12% per year for five years. We realize that Baron Rothschild has said that investors should “buy when there is blood on the streets”, but we caution that investors must first ensure that they are buying a high-quality business. It is always interesting to track the performance of the stock price over the long term. But to better understand Lions Gate Entertainment, we need to consider many other factors. Take risks, for example – Lions Gate Entertainment has 2 warning signs we think you should be aware.
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Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US exchanges.
Valuation is complex, but we are helping to simplify it.
Find out if Lions Gate Entertainment is potentially overvalued or undervalued by consulting our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, internal transactions and financial health.
View the free analysis
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This Simply Wall St article is general in nature. We provide feedback based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell any stock, and it does not take into account your goals or financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative material. Simply Wall St does not have a position in any of the mentioned stocks.