IMAX Corp (USA) (IMAX)

Am I missing something here? We have a firm that has been unprofitable over the past three years. They are provider of what is essentially a "luxury" theatre service. They have negative stockholders' equity and a good chunk of goodwill that even props up that figure a bit. They recently had to do a share offering to raise more capital. Even if they were to go back to 2005 levels of profitability and I add back depreciation and amortization to net income to come up with a free cash flow projection for my DCF analysis, I still only come up with a valuation around $7.

Mind you, I'm using a 11% cost of capital, which I feel is proper for a high-risk company like this, so maybe I could come up with a higher figure using a lower COC - but even with a 9% COC, I come up with a valuation around $9.25. And remember, there are a lot of *ifs* in that analysis. As in, *if* this company goes back to 2005 profitability levels and *if* I can assume that NI + DA is the best measure for a FCF analysis when actual FCFs have not been positive to begin with over the past three years.

I realize they have access to growth markets in India and China. That's a big plus, but I guess I'm still not convinced. I wouldn't go short on this because I haven't done enough research to assume that the market is wrong on India and China growth prospects, but if I were to see it creep to the $9 - $10 range, I'd become very tempted. However, at the current levels, I think this is a good underperform candidate.