Is Cinemark Still an Opportunity After Its Recent 26.1% Share Price Slide?

• If you are wondering whether Cinemark Holdings is a beaten down bargain or a value trap, you are in the right place to unpack what the current share price is really telling us.
• The stock has slid sharply in the short term, down 16.8% over the last week, 14.4% over the past month, and 26.1% year to date, even though it is still up 92.7% over three years and 52.9% over five years.
• These swings have come as investors reassess the long term prospects for movie theaters amid shifting box office trends and evolving competition from streaming platforms. Broader market volatility and changing risk appetite for consumer discretionary names have also added fuel to the recent moves.
• Despite the sell off, Cinemark currently scores a 6/6 valuation check rating. This suggests it screens as undervalued across all our standard metrics. Next, we will break down those valuation approaches, before finishing with a more nuanced way to think about what the stock might really be worth.

Find out why Cinemark Holdings's -34.4% return over the last year is lagging behind its peers.

Approach 1: Cinemark Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in dollar terms.

For Cinemark Holdings, the model starts with last twelve month Free Cash Flow of about $287.5 million and uses a 2 Stage Free Cash Flow to Equity approach. Analysts provide explicit forecasts for the next few years, and Simply Wall St then extrapolates those trends further out, with projected Free Cash Flow rising to roughly $425.4 million by 2035 as the business normalizes and grows.

When all of those future cash flows are discounted back to today, the DCF model produces an estimated intrinsic value of $55.07 per share. Compared with the current share price, this implies the stock is trading at a 58.4% discount to its calculated fair value, suggesting potential upside if the cash flow outlook proves accurate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Cinemark Holdings is undervalued by 58.4%. Track this in your watchlist or portfolio, or discover 915 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Cinemark Holdings.

Approach 2: Cinemark Holdings Price vs Earnings

For a profitable company like Cinemark, the Price to Earnings (PE) ratio is a useful way to judge whether investors are paying a reasonable price for each dollar of current earnings. In general, faster growing and lower risk businesses deserve higher PE ratios, while slower or riskier companies tend to trade on lower multiples.

Cinemark currently trades on a PE of about 17.3x. That is below both the Entertainment industry average of roughly 20.9x and the broader peer group average of about 51.2x, which on the surface suggests the stock is priced more conservatively than many competitors.

Simply Wall St also calculates a Fair Ratio of 20.1x for Cinemark, a proprietary estimate of what the PE should be once you factor in the company’s earnings growth outlook, profit margins, industry, market cap and specific risks. This tailored benchmark is more informative than a simple comparison with peers or the industry, because it adjusts for the company’s own strengths and weaknesses.

Comparing the Fair Ratio of 20.1x with the current 17.3x suggests Cinemark is trading at a discount to where it arguably should be.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Cinemark Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you attach a clear story, your view of Cinemark’s future revenue, earnings and margins, to the numbers you see on screen.

A Narrative connects three pieces: what you believe about a company’s business, how that belief translates into a financial forecast, and what fair value that forecast implies, so you can see whether today’s share price aligns with your expectations.

On Simply Wall St’s Community page, millions of investors use Narratives to do exactly this. They compare their own estimate of fair value to the current price so they can decide if Cinemark is a buy, a hold, or a sell, and then watch that view update dynamically as new earnings, news, and guidance are released.

For example, one Narrative on Cinemark might assume a robust box office pipeline, mid single digit annual revenue growth near 5 percent, and an earnings multiple around 16 times to support a fair value near 34 dollars. A more cautious Narrative might focus on streaming headwinds, pressure on margins, and a lower multiple that drives a fair value closer to 22 dollars.

Do you think there's more to the story for Cinemark Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.