• If you are wondering whether Cinemark Holdings at around US$23.23 is offering good value today, this article walks through what the current price might be implying about the business.
• The stock has seen mixed returns, with a 3.7% decline over the last 7 days, a roughly flat 0.1% move over 30 days, and a 1.3% decline year to date, set against an 18.5% decline over 1 year, gains of 83.0% over 3 years, and 16.5% over 5 years.
• Recent trading has put more attention on how the market is reassessing the long term outlook for cinema operators like Cinemark, especially given changing movie release patterns and competition from at home viewing. This context helps frame why some investors are revisiting what they are willing to pay for each dollar of Cinemark's future cash flows.
• Cinemark currently has a valuation score of 5 out of 6, which means it screens as undervalued on most of the checks used in that framework. Next we will walk through the key valuation approaches behind that score and finish with a way to bring those methods together into a clearer picture of value.

Approach 1: Cinemark Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those back to today’s value. It is essentially asking what all of Cinemark Holdings’ future cash generation is worth in present day dollars.

For Cinemark, the model used is a 2 Stage Free Cash Flow to Equity approach. The company’s latest twelve month Free Cash Flow is reported at about $287.5 million. Analysts provide detailed forecasts for the next few years, and beyond that Simply Wall St extrapolates cash flows out to 2035. By 2035, the model is using a projected Free Cash Flow of roughly $371.3 million, with each year between now and then also discounted back to today to account for risk and the time value of money.

Bringing all those discounted cash flows together produces an estimated intrinsic value of $26.55 per share, compared with the current share price around $23.23. That gap implies the shares trade at roughly a 12.5% discount.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Cinemark Holdings is undervalued by 12.5%. Track this in your watchlist or portfolio, or discover 866 more undervalued stocks based on cash flows.

Approach 2: Cinemark Holdings Price vs Earnings

For a profitable company like Cinemark Holdings, the P/E ratio is a useful way to think about valuation because it links what you pay for each share to the earnings that business is currently producing. Investors usually accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in the business model.

Cinemark is currently trading on a P/E of 17.54x. That sits below both the Entertainment industry average P/E of about 21.72x and the peer group average of about 56.11x. Simply Wall St also calculates a proprietary “Fair Ratio” of 21.67x for Cinemark, which is the P/E that would be expected given factors such as its earnings profile, industry, profit margins, market cap and risk characteristics.

This Fair Ratio can be more informative than a simple comparison with peers or the industry, because it adjusts for company specific features rather than assuming every Entertainment stock deserves the same multiple. Comparing the current 17.54x P/E with the 21.67x Fair Ratio suggests Cinemark’s P/E is below what this framework would expect.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Cinemark Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you attach your own story about Cinemark Holdings to the numbers such as your view on fair value, future revenue, earnings and margins.

A Narrative connects three things: what you think is happening with the business, how that flows through a forecast, and what that suggests for fair value, so you are no longer looking at ratios in isolation but at a joined up story.

On Simply Wall St, Narratives are an easy tool within the Community page, used by millions of investors, that help you compare your Fair Value with the current market price so you can decide whether the gap between price and value looks attractive or stretched based on your own assumptions.

Because Narratives sit on live forecasts, they update automatically when new information such as earnings releases or major news arrives. You can see, for example, one Cinemark Holdings Narrative that assumes a relatively cautious fair value and modest revenue growth next to another that assumes higher margins and a higher fair value, reflecting how two investors can read the same company very differently.

Do you think there's more to the story for Cinemark Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.