NEW YORK (TheStreet) - With The Walt Disney Company (DIS) reporting earnings yesterday and beating analysts' expectations, we decided to see what other movie and entertainment companies are good investments.
The industry, as it's known in Hollywood, is undergoing a technological revolution thanks to Web and digital advances. Success for movie and entertainment companies will depend on how efficiently they adapt to the new technologies and behaviors of consumers. The new environment is characterized by the widespread availability of digital content on the Web coupled with equally widespread use of smart phones and other mobile devices that make possible high quality media consumption. For example, the entertainment companies that will solve the riddle of how to profitably sell advertisers on the new platforms will reap hefty rewards.
So what are the best movies and entertainment companies investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which three movies and entertainment companies made the list. And when you're done be sure to read about which mid-cap oil companies to sell now. Year-to-date returns are based on May 5, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.CNK data by YCharts
3. Cinemark Holdings, Inc. (CNK)
Rating: Buy, A
Market Cap: $4.8 billion
Year-to-date return: 15.3%
Cinemark Holdings, Inc., together with its subsidiaries, engages in the motion picture exhibition business. The company operates theatres in the United States, Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, and Bolivia.
"We rate CINEMARK HOLDINGS INC (CNK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CINEMARK HOLDINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CINEMARK HOLDINGS INC increased its bottom line by earning $1.67 versus $1.28 in the prior year. This year, the market expects an improvement in earnings ($2.15 versus $1.67).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 203.4% when compared to the same quarter one year prior, rising from $15.59 million to $47.31 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 1.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, CINEMARK HOLDINGS INC's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 76.47% to $231.49 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 41.37%.
- You can view the full analysis from the report here: CNK Ratings Report