Should I buy Cineworld shares today?

first_img Rupert Hargreaves | Sunday, 31st January, 2021 | More on: CINE I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Cineworld (LSE: CINE) shares have been tossed around over the past year. Rolling lockdowns around the world have caused the company some severe headaches. It does not look as if these issues will go away any time soon. However, assuming the pandemic is only a temporary challenge, the group could make a comeback. And if it can stage a recovery, I think the stock looks cheap at current levels, and it could be an exciting acquisition for my portfolio. 5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Are Cineworld shares cheap? Shares in the cinema company do look cheap at first glance. The stock is changing hands at around 80p today, compared to a price of nearly 190p a year ago. But this price action does not tell us much about the company’s fundamental performance. Indeed, for much of the past 12 months, most of the group’s cinemas around the world have been closed. That means Cineworld has not been able to generate any income. I think that justifies a significantly lower share price than this time last year. As such, I think the company’s future will be closely tied to the world’s success in fighting the pandemic. As long as its locations remain closed, the group will continue to lose money as costs will exceed revenues. At the same time, the company has a tremendous amount of debt. Net-debt-to-EBITDA stood at around two times towards the end of last year.Generally speaking, I think that if a company has such a ratio of more than two, it is a risky purchase. On that basis, Cineworld shares appear to me to be an incredibly risky proposition. It is certainly not one for the risk-averse. Recovery potentialYet while there are plenty of risks attached to Cineworld right now, I feel the company also has plenty of opportunities. For example, its market capitalisation is currently around £1bn. In 2019, the last full year of uninterrupted business for the organisation, Cineworld produced a net profit of £180m. If it can return to this profitability level, I estimate the corporation is trading at a forward price-to-earnings (P/E) multiple of 5.6. Historically, the stock has traded at a forward P/E of around 15. I think this shows the potential that Cineworld shares have in the long term. However, these figures are only estimates. There’s no guarantee the business will ever be able to return to 2019 levels of profitability. There’s also no guarantee the company’s cash resources will be enough to keep the lights on until the pandemic recedes. Therefore, I’m going to keep an eye on Cineworld shares with the target of adding them to my portfolio when there’s more clarity on when the business will be able to reopen. It’s clear to me that the stock could generate high returns when owned as part of a diversified portfolio, but it also comes with plenty of risks. I’m watching it closely. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Simply click below to discover how you can take advantage of this. Should I buy Cineworld shares today? Enter Your Email Addresscenter_img Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Image source: Getty Images “This Stock Could Be Like Buying Amazon in 1997” Our 6 ‘Best Buys Now’ Shares I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. See all posts by Rupert Hargreaveslast_img read more