National CineMedia, Inc (NASDAQ: NCMI), a consumer discretionary company with a market capitalization of $1.2 billion, saw its share price increase by 36.6% over the last month. As a small-cap stock with decent coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could shares still be trading at a relatively cheap price? Let’s take a look at National CineMedia’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
What Is National CineMedia Worth?
According to our 7 valuation models, National CineMedia seems to be fairly priced in the market at 0.8% above its intrinsic value. This means if you were to buy National CineMedia today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $7.33, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$6.76||-8.6%|
|5-yr DCF Revenue Exit||$4.59||-37.9%|
|10-yr DCF EBITDA Exit||$10.62||43.8%|
|5-yr DCF EBITDA Exit||$9.73||31.7%|
|Peer EBITDA Multiples||$6.76||-8.5%|
|Dividend Discount Model||$6.86||-7.2%|
|Earnings Power Value||$5.97||-19.2%|
Click on any of the analyses above to view the latest model with real-time data.
In addition, it seems like National CineMedia’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of 0.68.
How Much Growth Will National CineMedia Generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
With National CineMedia’s relatively muted EBITDA growth of 2.2% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.
While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).
GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.
National CineMedia’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of National CineMedia, it may be worth holding off until the stock develops a larger margin of safety.
However, if you have not done so already, I highly recommend you complete your research on National CineMedia by taking a look at the following:
Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital ratio here.
Risk Metrics: what is National CineMedia, Inc’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.
Valuation Metrics: what is National CineMedia, Inc’s EBITDA less CapEx multiple and how does it compare to its peers? This is a helpful multiple to analyze when comparing capital intensive businesses. View the company’s EBITDA less CapEx multiple here.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.