The entertainment business has always been considered recession proof. During the hot summers, families would prefer to pay for movie tickets and sit in an air conditioned theater, instead of running the air conditioner at home. Teenagers will always be able to scrape together enough money for movie dates. Many thought that pay-per-view and video-on-demand would replace movie theaters, but it didn’t. Not even the Internet has replaced theaters. Smash hit movies have continued to bring in hundreds of millions of dollars. This review is focusing on more of the pure plays in movie theaters and motion picture production. The large entertainment companies, such as Disney (DIS), have been left out [but will be covered in a future article] because they are involved in many other areas besides movie production. Many of these stocks may be box office flops, but hopefully you can find a blockbuster.
Regal Entertainment Group (RGC) The company, which trades on the New York Stock Exchange, owns Regal Cinemas, United Artists Theaters, and Edwards Theaters, which includes over 6400 screens throughout the United States. The yield of 5.8% is nice and the Return on Equity is an extremely high 2241%, but be careful. Quarterly earnings and quarterly revenues have been in a downtrend. Because of the company’s huge amount of debt, the stock has a negative book value. The dividend payout is twice the amount of earnings.
DreamWorks Animation SKG Inc. (DWA) This company, of Shrek fame, is the largest independent developer of animated feature length films, of which they’ve produced over a dozen. The company was founded In 1994, Steven Spielberg, Jeffrey Katzenberg and David Geffen. Their blockbuster Shrek, won the first-ever Academy Award® for Best Animated Feature Film and Shrek 2 the highest-grossing animated film of all time. The P/E ratio is very high at 195, and so is the P/S at 7.5. Quarterly revenue growth was up over 18%.
Lions Gate Entertainment Corp. (LGF) This Santa Monica, California based company, which trades on the New York Stock Exchange, produces its own motion pictures and also purchases motion pictures from outside production companies. They are also involved in television programming. Although the P/E is a little high at 30, the return on equity is 26%, and the year over year quarterly earnings growth was 551%.
Carmike Cinemas Inc. (CKEC) This company operates almost 2500 screens throughout the U.S., with an penetration in the rural and smaller city markets. Pays a dividend yield of 3.1%, however, the earnings are negative. The P/S is a very favorable .58.
Genius Products, Inc. (GNPI.OB) Another Santa Monica based company, they produce, license, and distribute motion pictures and television programs on DVDs. P/E is a very low 4.95, P/S is 1.3. Quarterly revenue growth is 113%.
Image Entertainment Inc. (DISK) The company produces and purchases movies, television shows and other entertainment content for distribution on DVD. Negative earnings, reasonable P/S of .66, quarterly revenues have been dropping.
Peace Arch Entertainment Group Inc. (PAE) This Canadian based company, which trades on the American Stock Exchange, purchases and acquires medium and low budget films which it distributes worldwide. Negative earnings, negative profit margin, negative operating margin.
Author owns DIS and DWA.
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