Company Description

Lions Gate makes motion pictures, television programming and syndication. The company operates through two segments, Motion Pictures and Television Production. The company distributes a library of approximately 13,000 motion picture titles, television episodes, and programs directly to retailers, rental kiosks, and pay and free television channels through various digital media platforms in the United States, Canada, the United Kingdom, and Ireland, as well as indirectly to other international markets through its subsidiaries and various third parties. It also produces and syndicates 19 television shows, which air on 14 networks and distributes in approximately 200 series worldwide. Lions Gate was founded in 1986 and is headquartered in Santa Monica, California.

Lions Gate Beats Estimates in Two of Three Quarters

Lions topped the Zacks Consensus Estimate in two of the last three quarters. The March 2012 quarter saw the company post a beat of $0.03 or 16% ahead of the Zacks Consensus Estimate. Following this beat, the stock rose 3.2% in the session after the release.

The Septemeber 2012 quarter was the most recent report and the beat was nothing short of stunning. The company reported earnings per share of $0.53 when the Zacks Consensus Estimate called for $0.08. That meands a beat of $0.45 or 562%! The stock traded higher by more than 10% in the trading session following the release.

Lions Gate Sees Revenue Increases

In both quarters that saw positive earnings surprises, the company was able to post beats on the top line as well. The March 2012 quarter had revenue come in at $645M, about $3M more than the Zacks Consensus Estimate. The September quarter saw revenue of $707M, $89M or 14% more than the Zacks Consensus Estimate.

Toll Brothers Sees Estimates Moving Higher

Estimates for Lions Gate have been rising of late. The Zacks Consensus Estimate for 2012 for Toll Brothers stood at $0.54 as of February 2012. The consensus since moved higher to $0.42. Over the same time period estimates for 2013 have moved from $0.61 to $1.42. The implied earnings growth rate of more than 48% is just what aggressive growth investors are seeking.

Valuation

Lions Gate trades higher than the industry average for nearly every metric that aggressive growth investors tend to focus. The trailing twelve months PE of 39x is skewed due to some recent negative earnings. The forward earnings multiple of 20x is much more in line with the industry average of 16x. The price to book multiple, a more conservative measure, is 18x and well ahead of the industry average of 3x. The price to sales multiple of 1.2x is less than half of the 2.5x industry average.

The Chart

A quick look at the price and consensus chart shows a stock that has rallied throughout 2012. Analyst estimates continue to rise for the stock and the gaps between the years show the growth of earnings. As the earnings estimates continue to increase, the price of the stock is following in lock step. Lions Gate is a Zacks #1 Rank (Strong Buy).

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio

Brian is also the editor of Follow The Money Trader a trading service that tracks institutional money flows and looks for great stock picks from that data.

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