Facts to know before you bet on it

AMC Entertainment (AMC) has recently been on Zacks.com’s Most Searched Stocks list. Therefore, you may want to consider some of the key factors that may affect the stock’s performance in the near future.

Over the past month, this movie theater operator’s stock has returned -8.4% compared to the Zacks S&P 500 Composite’s -2.2% change. During this period, the Zacks Leisure and Recreation Services industry, which AMC Entertainment falls into, has lost 7.1%. The key question now is: What could the stock’s future direction be?

While media releases or rumors of a significant change in a company’s business outlook usually make its stock ‘trend’ and lead to an immediate price change, there are always some fundamental facts that ultimately dominate buy-and-hold decision-making.

Rather than focusing on anything else, at Zacks we prioritize evaluating the change in a company’s earnings projection. This is because we believe that the fair value of the stock is determined by the present value of its future earnings.

Our analysis is mainly based on how sell-side analysts covering the stock revise their earnings estimates to account for recent business trends. When earnings estimates for a company rise, so does the fair value of its stock. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in the price moving up. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, AMC Entertainment is expected to post a loss of $0.14 per share, indicating a change of +74.1% over the prior year quarter. The Zacks Consensus Estimate remained unchanged over the past 30 days.

For the current fiscal year, the consensus earnings estimate of -$0.95 points to a change of +59.9% from the prior year. Over the past 30 days, this estimate has changed +24.5%.

For the next fiscal year, the consensus earnings estimate of -$0.43 indicates a change of +54.6% from what AMC Entertainment is expected to report a year ago. Over the past month, the estimate has changed -24.5%.

With an impressive externally audited track record, our proprietary stock rating tool – Zacks Rank – is a more conclusive indicator of a stock’s near-term price performance as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for AMC Entertainment.