Redstone owns about 80% of the company, and at 92 years of age, there are disagreements of who will lead the company after he leaves. Shari Redstone, the daughter of the Chairman, has been battling with CEO Philippe Dauman about leadership after Redstone is not with the company anymore.
Can Viacom thrive at all without Sumner Redstone?
Here is the recommendation, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
When you're done, be sure to read about these top-rated dividend stocks to buy. Year-to-date returns are based on October 6, 2015 closing prices.
Viacom Inc. operates as an entertainment content company in the United States and internationally. The company creates television programs, motion pictures, short-form video, applications, games, consumer products, social media, and other entertainment content.
TheStreet Ratings team rates VIACOM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate VIACOM INC (VIA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VIACOM INC has improved earnings per share by 5.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, VIACOM INC increased its bottom line by earning $5.45 versus $4.90 in the prior year. This year, the market expects an improvement in earnings ($10.95 versus $5.45).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, VIACOM INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- VIA, with its decline in revenue, underperformed when compared the industry average of 6.4%. Since the same quarter one year prior, revenues fell by 10.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has decreased to $400.00 million or 27.27% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The debt-to-equity ratio is very high at 4.56 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, VIA maintains a poor quick ratio of 0.82, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: VIA