IMAX has been on fire lately. In the past six months alone, the company’s stock price has rocketed 40.5%, reaching $53.47 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy IMAX? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is IMAX a Good Business?
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE:IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, IMAX’s 17.9% annualized revenue growth over the last five years was incredible. Its growth beat the average business services company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, IMAX’s margin expanded by 24.8 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. IMAX’s free cash flow margin for the trailing 12 months was 24%.
3. New Investments Bear Fruit as ROIC Jumps
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
Fortunately, IMAX’s ROIC has increased over the last few years. Its rising ROIC is a good sign and could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why we’re bullish on IMAX, and with the recent surge, the stock trades at 25.6× forward P/E (or $53.47 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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