Is Lions Gate Entertainment a Buy At All Time Highs?

With shares of Lions Gate Entertainment (NYSE:LGF) trading around $36, is LGF an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Lions Gate Entertainment is an entertainment company that engages in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution, new channel platforms, and international distribution and sales activities. The company operates through two segments: Motion Pictures and Television Production.

It's always been a given that Lionsgate's second installment of the Hunger Games franchise, The Hunger Games: Catching Fire, would be a huge box office smash, but a new report from a Variety sheds some light on just how popular the film might be. Advanced tickets for the film went on sale at 9 a.m. PDT on Tuesday, and within an hour, Lionsgate's Catching Fire represented 23 percent of advance tickets sold within a 24-hour span.

T = Technicals on the Stock Chart Are Strong

Lions Gate Entertainment stock has been exploding higher in the last several quarters. The stock is currently trading near all-time highs and looks ready to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Lions Gate Entertainment is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Lions Gate Entertainment options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Lions Gate Entertainment Options	37.80%	96%	95%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
October Options	Flat	Average
November Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Lions Gate Entertainment’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Lions Gate Entertainment look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	139.39%	453.21%	2800.00%	378.95%
Revenue Growth (Y-O-Y)	-26.92%	N/A	130.20%	97.43%
Earnings Reaction	-0.87%	2.74%	-0.60%	14.24%

Lions Gate Entertainment has seen increasing earnings and and mixed revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Lions Gate Entertainment’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Lions Gate Entertainment stock done relative to its peers, Disney (NYSE:DIS), Twenty-First Century Fox (NASDAQ:FOXA), Viacom (NASDAQ:VIAB), and sector?

	Lions Gate Entertainment	Disney	Twenty-First Century Fox	Viacom	Sector
Year-to-Date Return	124.50%	30.71%	52.56%	56.64%	37.29%

Lions Gate Entertainment has been a relative performance leader, year-to-date.

Conclusion

Lions Gate Entertainment is involved in motion picture production and distribution as well as television programming and syndication. The next installment of its Hunger Games series seems to be generating positive buzz as presales are breaking records. The stock has been surging higher in recent years and is now trading near all time highs. Over the last four quarters, earnings have been rising while revenues have been mixed, which has produced conflicting feelings about recent earnings releases among investors in the company. Relative to its peers and sector, Lions Gate Entertainment has been a year-to-date performance leader. Look for Lions Gate Entertainment to OUTPERFORM.