NEW YORK (TheStreet) -- Warner Bros. will start making Chinese movies. The studio, which is owned by Time Warner Inc. (TWX) , made a deal with China Media Capital, a private-equity firm, to start making Chinese-language movies.
The venture, which will be 49% owned by Time Warner, is called Flagship Entertainment Group Ltd.
China is right behind the U.S. in the film market, at No. 2. Warner Bros. believes this deal will help the studio expand.
Will this greatly benefit Time Warner's stock, or is this a smaller play for the company?
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 which pharmaceutical stocks JPMorgan recommends. Year-to-date returns are based on September 21, 2015 prices as of 12:37pm.
Time Warner Inc. operates as a media and entertainment company in the United States and internationally. It operates through three segments: Turner, Home Box Office, and Warner Bros.
TheStreet Ratings team rates TIME WARNER INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TIME WARNER INC (TWX) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TWX's revenue growth has slightly outpaced the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 8.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.99, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems.
- TIME WARNER INC has improved earnings per share by 23.4% 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. During the past fiscal year, TIME WARNER INC increased its bottom line by earning $4.39 versus $3.56 in the prior year. This year, the market expects an improvement in earnings ($4.66 versus $4.39).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Media industry average. The net income increased by 14.2% when compared to the same quarter one year prior, going from $850.00 million to $971.00 million.
- You can view the full analysis from the report here: TWX