Market volatility can lead to what are otherwise stellar long-term investments to see significant drops. More importantly, these ridiculously undervalued growth picks are often dismissed by investors thanks to that drop.
One such example of a ridiculously undervalued growth stock is Cineplex (TSX:CGX), and here’s why you may want to reconsider the stock right now.
All about Cineplex
Cineplex is the largest entertainment company in Canada. That broad classification includes live entertainment, gaming, and its core movie theatre business.
The theatre business adheres to a century-old business model that hasn’t changed much in the past century. In short, it charges admission to shows and sells concessions to patrons.
That movie-and-popcorn model has come under scrutiny over the past years, leading to a significant stock drop. In short, the issue can be traced back to the proliferation of online streaming services and the pandemic.
Those issues have pushed the stock down an incredible 65% over the past five years.
The opportunity for prospective investors
Thankfully, things are turning up for Cineplex. In fact, in the most recent update, Cineplex posted $463.6 million in revenue, the highest quarterly revenue number ever. Part of this can be attributed to rising box office revenues fueled by blockbuster titles.
That trend is likely to continue into this next blockbuster season with a flurry of new releases. Prime examples of this include Deadpool & Wolverine, Despicable Me 4, and Bad Boys: Ride or Die.
Another key point for investors to note is Cineplex’s continued efforts to diversify its revenue stream. That includes efforts both inside and outside of its theatres.
Inside the theatres, Cineplex has added and expanded a slew of premium services over the years with higher price points. This includes both the VIP and IMAX experiences, which coincidentally were responsible for over 40% of the company’s revenue.
Outside its core business, Cineplex continues to expand its entertainment portfolio through its Playdium and Rec Room brands. The gaming and live entertainment venues have proven successful leading to additional locations added across the country.
Buy this ridiculously undervalued growth stock
No stock, even the most defensive, is without some risk. And while Cineplex has improved its financials over the past year, the stock still does hold considerable risk. That risk does, however, get offset somewhat over longer-term horizons.
As of the time of writing, Cineplex trades at just over $9, which is still less than a movie ticket in many areas.
In my opinion, investors who can tolerate some risk and have long-term timelines should consider adding a small position in this ridiculously undervalued growth stock as part of a larger, well-diversified portfolio.
Buy it, hold it, and watch it grow.
