Because the inventory market setting deteriorated over the previous couple of days because of worries in regards to the stability of economic establishments all over the world, particularly within the U.S., many firms, together with Cineplex (TSX:CGX), have seen their inventory costs fall as soon as once more.

Cineplex is buying and selling at simply over $7.50 per share on the time of writing, lower than 5% off its 52-week low, creating a major alternative for long-term traders.

In truth, over the past yr, whilst its operations have begun to rebound quickly, Cineplex inventory has misplaced over 40% of its worth.

So there’s little question that Cineplex inventory is buying and selling ultra-cheap. But, with the potential for a major catalyst within the close to time period, because it continues to see an enchancment in income and profitability, Cineplex could possibly be on the verge of a major restoration rally.

Cineplex inventory is off to its greatest yr because the pandemic

On Tuesday, Cineplex inventory launched its field workplace numbers for February. They confirmed that it earned 88% of February of 2019 income previous to the pandemic, in keeping with its efficiency in January.

With pandemic restrictions gone and tonnes of blockbuster motion pictures set to be launched this yr, the movie business can also be recovering from the pandemic. Likewise, many have been hoping and anticipating Cineplex inventory to see a major rebound this yr.

Because the CEO, Ellis Jacob, stated within the launch, “These outcomes reveal that when there’s compelling content material, client enthusiasm for theatrical moviegoing is as sturdy as ever.”

Plus, not solely had been field workplace numbers sturdy as soon as once more, however theatre meals service income was really larger than in the identical month in 2019. That’s a formidable outcome, particularly with many anticipating a recession to be on the horizon and shoppers to rein of their spending.

So if Cineplex can sustain this spectacular efficiency going ahead this yr, the inventory could possibly be on the verge of an enormous rally.

Cineplex is buying and selling unbelievably low cost on this setting

Even earlier than the current sell-off in shares over the previous couple of days, Cineplex inventory was already one of many most cost-effective available on the market. However with the inventory value persevering with to fall within the close to time period, it’s now unbelievably undervalued.

At simply over $7.50 a share, the inventory is buying and selling at 15 instances its anticipated 2023 earnings. That’s not solely the most affordable valuation it has had since its anticipated earnings turned optimistic, however it’s additionally cheaper than Cineplex traded at any level within the 5 years main as much as the pandemic.

Moreover, whereas it’s anticipated to report normalized earnings per share (EPS) of $0.50 in 2023, analysts anticipate it to earn $1.00 in normalized EPS in 2024. Due to this fact, Cineplex inventory is buying and selling at simply 7.5 instances its anticipated 2024 earnings.

Cineplex additionally trades at a horny ahead enterprise worth (EV) to earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) ratio of simply 6.6 instances at present.

That’s additionally cheaper than at any level through the 5 years main as much as the pandemic when Cineplex averaged an EV-to-EBITDA ratio of 11.2 instances, roughly 70% larger than at present.

The inventory has change into so low cost that its common analyst goal value sits at roughly a 70% premium to the place it trades at present. And as Cineplex inventory continues to get well and its EPS improves, these goal costs ought to proceed to extend.

So in the event you’ve been watching Cineplex ready for a perfect time to purchase the ultra-cheap inventory, or in the event you’re simply trying to benefit from all of the reductions within the inventory market nowadays, Cineplex is among the high investments to think about. This film home could possibly be on the verge of an enormous rally.