IMAX Corporation (NYSE:IMAX), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, what if the stock is still a bargain? Let's examine IMAX's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What Is IMAX Worth?
IMAX is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 55.75x is currently well-above the industry average of 17.69x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that IMAX's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of IMAX look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for IMAX. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? IMAX's optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe IMAX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping an eye on IMAX for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for IMAX, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into IMAX, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for IMAX you should be aware of.
If you are no longer interested in IMAX, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
