Lions Gate Entertainment Corp. – Value Analysis (NYSE:LGF.B) : November 14, 2017

Capitalcube gives Lions Gate Entertainment Corp. a score of 66.

Our analysis is based on comparing Lions Gate Entertainment Corp. with the following peers – MSG Networks Inc. Class A, Movie Studio, Inc., Players Network and Point.360 (MSGN-US, MVES-US, PNTV-US and PTSXQ-US).

Investment Outlook

Lions Gate Entertainment Corp. has a fundamental score of 66 and has a relative valuation of OVERVALUED.

Fundamental Score

Access our research and ratings on Lions Gate Entertainment Corp.

Company Overview

  • LGF.B-US has traded publicly for less than a year.
  • It’s current Price/Book of 1.38 is about median in its peer group.
  • LGF.B-US outperforms its peers with a relatively high operating performance and the market also expects faster growth relative to its peers
  • LGF.B-US has relatively high profit margins while operating with median asset turns.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • LGF.B-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While LGF.B-US‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median P/E ratio.
  • The company is likely overinvesting in a business with only median returns.
  • LGF.B-US seems too levered to raise additional debt.

Access our research and ratings on Lions Gate Entertainment Corp.

Leverage & Liquidity

LGF.B-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 47.80% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 47.80%), and relatively tight interest coverage level of 1.46x, LGF.B-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 4 peers for the company have an outstanding debt balance.

LGF.B-US has maintained its Limited Flexibility profile from the recent year-end.

  • LGF.B-US‘s interest coverage is upward trending but is still within one standard deviation below its five-year average interest coverage of 1.97x.
  • While its interest coverage increased to 1.46x from 0.68x (in 2017), its peer median decreased during this period to -3.85x from -3.14x.
  • Interest coverage rose 1.49 points relative to peers.
  • LGF.B-US‘s debt-EV is similar to last year’s low of 47.80%, which compares to the 2016 high of 98.17%.
  • Compared to 2017, debt-EV has remained relatively stable for both the company (47.80%) and the peer median (47.80%).

Access the detailed analysis for Lions Gate Entertainment Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
MSG Networks Inc. Class A 45.94 2.75 7.64 14.3
Movie Studio, Inc. 68.45 3.97 -41.53 -6.08
Players Network 0.82 0.12 -3.85 -242.73
Point.360 73.58 0.77 -16.62 -104.37
Lions Gate Entertainment Corp Class B 47.8 1.01 1.46 65.16
Peer Median 47.8 1.01 -3.85 -6.08
Best In Class 0.82 3.97 7.64 65.16

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Company Profile

Lions Gate Entertainment Corp. engages in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution, new channel platforms and international distribution and sales. It operates through the Motion Pictures, Production and Television Production segments. The Motion Pictures segment consists of the development and production of feature films, acquisition of North American and worldwide distribution rights, North American theatrical, home entertainment and television distribution of feature films produced and acquired, and worldwide licensing of distribution rights to feature films produced and acquired. It is composed of two sub segments: Production and Distribution. The Production segment includes financing motion pictures, as well as the development of a screenplay, the actual filming activities and post-filming editing and post-production process. The Distribution segment distributes motion pictures directly to U.S. movie theatres. The Television Production segment involves in the development, production and worldwide distribution of television productions, including television series, television movies and mini-series and non-fiction programming. The company was founded by Frank Guistra on April 28, 1997 and is headquartered in Santa Monica, CA.

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