Tuesday, August 7, 2007

Movie Gallery Inc.

Movie Gallery Inc. is a NASDAQ listed security that has been trading in a range between $0.48 and $6.78 over the past year. With 31,892,240 shares outstanding, a recent price of $0.54 gives a total market capitalization of $16,265,042. While there are certainly larger companies, Movie Gallery Inc. has definitely earned its place in the pack. Last year, Movie Gallery Inc. created $-2.54 in earnings for every share outstanding.

Movie Gallery Inc. is currently priced by the market at 0.00 times last year’s earnings. Many trading multiples around the world are quite attractive these days, but don’t be fooled. A Price to Earnings ratio of 0 simply means that the security didn’t make any money last year.

With a share price under $50 a share and earnings per share below $1 a share, Movie Gallery Inc. is unlikely to be an interesting value proposition. Consistent earnings are the key to high valuations and this security is not on its way.