We’re definitely interested in long-term investments, but some companies are just bad investments over any time frame. We really hate to see other investors lose their hard-earned money. Anyone who held Lions Gate Entertainment Corp. (NYSE:LGF.A) has been nursing its metaphorical wounds for five years, as its stock price has fallen 80% in that time. And some of the newer buyers are likely concerned, too, given that the stock has fallen 55% over the past year. Shareholders have had an even rougher run of late, with the stock price falling 34% over the past 90 days. We note that the company has only recently reported results; and the market is hardly pleased. The current figures can be found in our company report.
After losing 9.8% over the past week, it’s worth examining the company’s fundamentals to see what we can infer from past performance.
Our analysis indicates this LGF.A is potentially undervalued!
With Lions Gate Entertainment not making a profit in the last 12 months, let’s focus on revenue growth to get a quick view of business development. In general, when a company isn’t making profits, we expect good revenue growth. Some companies are willing to defer profitability in order to grow sales faster, but in this case, expect good sales growth.
For the past five years, Lions Gate Entertainment has seen its revenue decline 3.8% per year. While that’s far from catastrophic, it’s not good. The 12% annual stock price decline over five years is a stark reminder that loss-making companies are expected to grow revenue. We’re generally averse to companies with declining sales, but we’re not alone. Fear of becoming a “baggie” might keep people away from this stock.
The chart below shows how revenue and earnings have evolved over time (click on the image to find out the exact values).
It’s good to see that there has been some significant insider buying over the past three months. That’s positive. However, we believe that earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Lions Gate Entertainment stock, you should check this out free Analyst earnings forecast report.
A different perspective
We regret to report that Lions Gate Entertainment shareholders are down 55% for the year. Unfortunately, that’s worse than the broader market’s 19% decline. However, it could simply be that the stock price has been affected by broader market swings. It might be worth keeping an eye on the fundamentals should a good opportunity present itself. Unfortunately, last year’s performance capped a poor run, with shareholders posting a cumulative 12% annual loss over five years. We are aware that Baron Rothschild said investors should “buy when there is blood in the streets” but caution that investors should first be confident they are buying a quality company. It is always interesting to follow stock price developments over the longer term. But to better understand Lions Gate Entertainment, we need to consider many other factors. Take risks, for example – Lions Gate Entertainment has it 2 warning signs We think you should be aware of this.
There are many other companies where insiders buy stock. You probably do Not want to miss this free List of growing companies that insiders are buying.
Please note that the market returns reported in this article reflect the market-weighted average returns of stocks currently traded on US exchanges.
The assessment is complex, but we help to simplify it.
find out if Lions Gate Entertainment may be over or under priced by reviewing our comprehensive analysis which includes the following Fair Value Estimates, Risks and Warnings, Dividends, Insider Trading and Financial Health.
Check out the free analysis
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This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.