AMC Networks has gotten torched over the last six months - since December 2024, its stock price has dropped 36.9% to $6.15 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy AMC Networks, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think AMC Networks Will Underperform?
Despite the more favorable entry price, we don't have much confidence in AMC Networks. Here are three reasons why we avoid AMCX and a stock we'd rather own.
1. Revenue Spiraling Downwards
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. AMC Networks’s demand was weak over the last five years as its sales fell at a 4.6% annual rate. This was below our standards and signals it’s a low quality business. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for AMC Networks, its EPS declined by 16.4% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, AMC Networks’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
AMC Networks falls short of our quality standards. Following the recent decline, the stock trades at 2.1× forward P/E (or $6.15 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere. We’d suggest looking at our favorite semiconductor picks and shovels play.
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