Every cloud has a silver lining, and Chicken Soup for the Soul Entertainment Inc., a player in the Communication Services sector, might just be that silver lining for savvy investors. Despite the company's loss of $116.7M in EBIT and a negative free cash flow of $68.7M, there are several indicators that suggest untapped investment potential. Firstly, the company's enterprise value to revenue ratio stands at 1.42, which is relatively low, indicating that the company could be undervalued. Additionally, Chicken Soup holds a substantial amount of intangible assets valued at $431.5M, which could provide a cushion against future financial shocks. Moreover, the company's book value per share is 0.60X, and it has a target price of $2.56, suggesting potential for growth. The stock also has a short ratio of 6.27, indicating that it could be a good candidate for a short squeeze, which could drive the price up. However, investors should also consider the company's net debt of $479M and its negative net working capital of $25.4M. Despite these challenges, one analyst has given the stock a buy rating, indicating some confidence in its
future performance. In conclusion, while Chicken Soup has its share of financial challenges, it also has several indicators that suggest potential for growth. As always, investors should conduct their own due diligence before making investment decisions. Currently, Chicken Soup's Average Equity is projected to see a significant increase, based on the reporting trends of the past few years. The Enterprise Value for the current year is expected to grow to approximately $593.8 million, while Earnings Before Tax are forecasted to decline to -$142.5 million. Chicken Soup is set to announce its earnings today, with the next financial report anticipated on March 29, 2024. While some Generation Y investors may be indifferent towards the entertainment sector, it is prudent to analyze Chicken Soup based on its fundamental financials. We will assess why we remain optimistic about a potential recovery. The question remains: will shareholders continue to hold, or should we anticipate a sell-off?
Typically, a company's
financial statements are the reports that show the
financial position of the company. There are three main documents that fall into the category of financial statements. These documents include Chicken Soup income statement, its balance sheet, and the statement of cash flows. Potential Chicken Soup investors and stakeholders use financial statements to determine how well the company is positioned to perform in the future. Although Chicken Soup investors may use each financial statement separately, they are all related. The changes in Chicken Soup's assets and liabilities, for example, are also reflected in the revenues and expenses that we see on Chicken Soup's income statement, which results in the company's gains or losses. Cash flows can provide more information regarding cash listed on a balance sheet, but not equivalent to net income shown on the income statement. Please read more on our
technical analysis and
fundamental analysis pages.
The goal of Chicken Soup
fundamental analysis is to do accurate financial forecasts. There are several possible objectives to fundamental analysis, such as projecting of Chicken Soup performance into the future periods or doing a reasonable stock valuation. The intrinsic value of Chicken Soup shares is the value that is considered the true value of the share. If
the intrinsic value of Chicken is higher than its market price, buying is generally recommended. If it is equal to the market price, it is recommended to hold; and if it is less than the market price, then one should sell all shares Chicken Soup. Please read more on our
fundamental analysis page.
Watch out for price decline
Please consider monitoring Chicken Soup on a daily basis if you are holding a position in it. Chicken Soup is trading at a penny-stock level, and the possibility of delisting is much higher compared to other delisted stocks. However, just because the stock is trading under one dollar, does not mean it will be marked for deletion.
Most exchanges require public instruments, such as Chicken Soup stock to be traded above the $1 level to remain listed. If Chicken Soup stock price falls below $1 for 30 consecutive trading days, the exchange can delist it. Once the company reaches this point, they will be sent an initial price violation notice directly from an exchange.
How important is Chicken Soup's Liquidity
Chicken Soup
financial leverage refers to using borrowed capital as a funding source to finance Chicken Soup For ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Chicken Soup financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Chicken Soup's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Chicken Soup's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the
breakdown between Chicken Soup's total debt and its cash.
Another Deeper Perspective
Although in the United States, the Securities and Exchange Commission has enforced strong rules to prevent insiders from engaging in insider trading, finding insiders among active shareholders of Chicken Soup is not uncomon. Institutional investors typically avoid acquiring a high percentage of Chicken Soup stocks because performing such an act may violate securities laws. They are usually not investing their own money, but rather making investments on behalf of their clients. Let's take a look at how the ownership of Chicken is distributed among investors.
Ownership Allocation
Chicken Soup For retains a total of 23.73 Million outstanding shares. Chicken Soup For retains significant amount of outstanding shares owned by
insiders. An
insider is usually defined as a CEO, other corporate executive, director, or
institutional investor who own at least 10% of the company's outstanding shares. Since such a large part of the company is owned by insiders, it is advisable to analyze if each of these insiders have been buying or selling the stock in recent months. Remember, it does not matter who owns the company or if the company is currently
losing money. If the true value of the company is more than the market pays for it currently, you can still have a good investment opportunity.
| Retail Investors57.64% | Insiders29.88% | Institutions12.48% |
| Retail Investors | 57.64 |
| Insiders | 29.88 |
| Institutions | 12.48 |
Please be aware that individual investors typically purchase shares for their personal accounts and usually in smaller quantities compared to institutional investors. While they might influence Chicken Soup's decisions if they own a significant combined portion of its shares, such influence is relatively rare. Conversely, institutional investors - like mutual funds, pension funds, hedge funds, and other investment companies - often have a substantial sway over Chicken Soup's decisions due to their larger holdings.
Asset Utilization
The asset utilization indicator refers to the revenue earned for every dollar of assets a company currently reports. Chicken Soup has an asset utilization ratio of 28.6 percent. This indicates that the company is making $0.29 for each dollar of assets. An increasing asset utilization means that Chicken Soup For is more efficient with each dollar of assets it utilizes for everyday operations.
| Goodwill | 746.92 Million | 99.94 |
| Tax Assets | 482,947 | 0.0646 |
Every cloud has a silver lining, and Chicken Soup for the Soul Entertainment Inc. might just be that unexpected opportunity for investors. Despite a high probability of bankruptcy at 88.41%, the company's untapped potential lies in its intangible assets valued at $431.5M and goodwill of $260.7M. The company's current ratio stands at 1.54X, indicating a healthy short-term liquidity position. However, investors should be aware of the company's significant long-term debt of $479.7M and total operating expenses of $348.5M, which resulted in an EBIT loss of $116.7M. Despite these challenges, the company's shares are owned by institutions at 12.48% and insiders at 29.88%, suggesting some level of confidence in its
future prospects. With a potential upside of 6.25 and a price to earnings ratio of 5.06X, Chicken Soup could be a high-risk, high-reward play for adventurous investors.
Are Chicken Soup technical ratios showing a reversion?
The recent decline in the total risk alpha indicator for Chicken Soup to -0.73 could potentially suggest an upcoming price growth. Historically, such a low value often precedes a reversion to the mean, indicating a possible undervaluation of the stock. Consequently, investors might anticipate an upward price adjustment as the market corrects this discrepancy. However, this is a speculative scenario and should be considered in conjunction with other market indicators and company
fundamentals before making any investment decisions. Chicken Soup exhibits very low volatility with a skewness of -0.29 and a kurtosis of 0.6. Nevertheless, we recommend investors to further analyze Chicken Soup's technical indicators to ensure all market information is available and reliable. Chicken Soup is a potential penny stock. While Chicken Soup may indeed be a good investment instrument, many penny stocks are speculative in nature and are subject to artificial price inflation. Please ensure you fully understand the upside potential and downside risk of investing in Chicken Soup. We urge investors to be vigilant for signals such as email spam, message board hype, claims of breakthroughs, volume upswings, sudden news releases, unreported promotions, or demotions released prior to SEC filings. Also, please review the biographies and work histories of current and past company officers before investing in high volatility instruments, penny stocks, or equities with microcap classification.
Investing in Chicken Soup can indeed be profitable if you time your entry and exit perfectly. However, keep in mind that penny stocks that have been subject to artificial hype are usually unable to maintain their increased share price for more than a few days. The price of a promoted high volatility instrument will almost always revert back. The only way to increase shareholder value is through legitimate performance backed by solid fundamentals. In conclusion, Chicken Soup for the Soul Entertainment Inc. presents a compelling investment opportunity. With a market valuation of
$0.28 billion and a real value of
$1.75 billion, the company is significantly undervalued. The
analyst consensus is a 'Buy', with 3 strong buys, 1 buy, and only 2 holds. Furthermore, the highest estimated target price stands at $21, significantly higher than the current price. Despite the hype value being equal to the market value, the fiscal year-end results in December could potentially bring positive surprises. Therefore, for those still doubtful about Chicken Soup, it may be time to reconsider. .
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Nico Santiago is a PR Contributor to Macroaxis Editorial Board. Nico is a relatively new author here at Macroaxis and he likes to work on advertising and sponsored content and marketing for the company. Nico spends most of his time surfing when the weather is nice and he spends the rest of the year writing for various blogs and companies, as he works on his upcoming books, The Rise of the Financial Machines and Time Series Modelling with AI.
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