AMC Entertainment Holdings, Inc. (AMC) and its subsidiaries engage in the theatrical exhibition business and operate 22 of the 50 highest-grossing theaters in the United States.

The overall theater industry remains gloomy. According to the National Association of Theater Owners, nearly 500 screens have closed since the pandemic, and many more await closure with several bankruptcy filings.

Eric Wold, a senior analyst at B. Riley Securities, claimed, "We're going to see smaller, noncorporate screens start to disappear in greater numbers."

Given this backdrop, AMC has lost 16.4% over the past month to close the last trading session at $7.99. It has lost 70.6% year-to-date and 80% over the past year. The stock hit its 52-week low of $6.81 on September 23, 2022.

Here is what could shape AMC's performance in the near term:

Declining Cash Balance

AMC's total revenues came in at $1.17 billion for the second quarter that ended June 30, 2022, up 162.3% year-over-year. Its adjusted loss per share came in at $0.20, down 71.8% year-over-year. However, its film exhibition costs increased 232.4% year-over-year to $328.70 million.

Moreover, its cash and cash equivalents came in at $965.20 million for the period ended June 30, 2022, compared to $1.59 billion for the period ended December 31, 2021.

Stretched Valuation

In terms of its forward EV/Sales, AMC's 3.17x is 68.3% higher than the industry average of 1.89x. Its forward EV/EBITDA of 58.09x is 668.9% higher than the industry average of 7.56x.

Poor Profit Margins

AMC's trailing-12-month gross profit margin of 10.75% is 78.7% lower than the industry average of 50.52%. Its 2.40% trailing-12-month EBITDA margin is 87.6% lower than the industry average of 19.31%. Also, its trailing-12-month negative net income margin of 21.03% is lower than the industry average of 5.73%.

Moreover, AMC's trailing-12-month ROTC and ROTA of negative 2.16% and 8.33% compare with the industry averages of 3.58% and 2.48%, respectively.

POWR Ratings Reflect Bleak Prospects

AMC has an overall rating of D, equating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

AMC has a C grade for Momentum. It is trading below its 50-day moving average of $14.19. In addition, it has an F grade for Stability, in sync with its beta of 1.78.

AMC is ranked last in the 6-stock Entertainment - Movies/Studios industry. The industry is rated F.

Click here for the additional POWR Ratings for AMC (Growth, Value, Sentiment, and Quality).

View all the top stocks in the Entertainment - Movies/Studios industry here.

Bottom Line

AMC's EPS is estimated to fall 217% per annum for the next five years. Moreover, given its poor profitability amid deteriorating prospects of the overall theater business, I think AMC might be best avoided now.

AMC shares rose $0.06 (+0.88%) in after-hours trading Monday. Year-to-date, AMC has declined -74.89%, versus a -22.41% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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