Various business units at Lionsgate films ranging from movies and home entertainment to stage plays such as Dirty Dancing appear to be executing well. Moreover, movies such as 3:10 to Yuma, War, Good Luck Chuck and Saw IV helped Lionsgate capture 4 out of the top 8 DVDs sold spots in January.
And, The Saw and Tyler Perry franchises have proved highly successful for Lionsgate with the Saw franchise alone bringing in over half a billion dollars in revenue worldwide. Lionsgate expects to capitalize on the success of Crash by launching a 13 episode mini-series in partnership with Starz.
Lionsgate announced that it expects to report more than $400 million in fourth quarter revenue, well above analyst estimates of $344.3 million. The company also revised upwards its full year revenue estimate to over $1.2 billion
The company expects to increase its cash and cash equivalents to $350 million by the end of fiscal 2008 and is attractively valued with a forward P/S of 0.92 and Price/Free Cash Flow of 10.
Moreover, Lionsgate's balance sheet may not appear very strong on first glance with nearly $600 million in long-term debt. However, almost $269.37 million of that is film obligations and the rest is convertible bonds at a cost of capital of just 3.31%. The company expects interest from its cash position to cover the interest payments on the debt and with closer inspection, the debt does not seem so bad.