Long-established in the Media - Diversified industry, AMC Entertainment Holdings Inc (AMC, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 7.11%, juxtaposed with a three-month change of -57.27%. Fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of AMC Entertainment Holdings Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- 1. Financial strength rank: 2/10
- 2. Profitability rank: 4/10
- 3. Growth rank: 1/10
- 4. GF Value rank: 9/10
- 5. Momentum rank: 4/10
Based on the above method, GuruFocus assigned AMC Entertainment Holdings Inc the GF Score of 58 out of 100, which signals poor future outperformance potential.
AMC Entertainment Holdings Inc: A Snapshot
AMC Entertainment Holdings Inc is involved in the theatrical exhibition business. It owns, operates, or has interests in theatres located in the United States and Europe. The company provides amenities such as plush, power recliners, MacGuffins full bars, AMC Dine-In Theatres, and premium presentations. The group operates in U.S. markets and International markets, deriving key revenue from the U.S. With a market cap of $2.62 billion and sales of $4.26 billion, the company's operating margin stands at -4.74%.
Financial Strength Breakdown
AMC Entertainment Holdings Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 620 companies in the Media - Diversified industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just -0.82, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.05 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 180.72, which is above Joel Tillinghast's warning level of 4 and is worse than 99.49% of 590 companies in the Media - Diversified industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Profitability Breakdown
AMC Entertainment Holdings Inc's low Profitability rank can also raise warning signals. AMC Entertainment Holdings Inc's Operating Margin has declined over the past five years ((-262.57%)), as shown by the following data: 2018: 5.68; 2019: 4.31; 2020: -124.00; 2021: -29.52; 2022: -9.23. With a Piotroski F-Score of 2, AMC Entertainment Holdings Inc's financial health appears concerning. This score, rooted in Joseph Piotroski's nine-point scale, evaluates a firm's profitability, liquidity, and operating efficiency. Given its rating, AMC Entertainment Holdings Inc might be facing challenges in these areas.
Growth Prospects
A lack of significant growth is another area where AMC Entertainment Holdings Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -58.6 per year over the past three years, which underperforms worse than 97.18% of 959 companies in the Media - Diversified industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, AMC Entertainment Holdings Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given AMC Entertainment Holdings Inc's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While the company has a rich history in the Media - Diversified industry, its current financial indicators suggest that it may struggle to maintain its past performance. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
