
Warner Bros. Going to China; Buy Time Warner Stock With Sliding Market?
NEW YORK (TheStreet) -- With Warner Bros. in talks to start making movies in China, we decided to take a look at Time Warner Inc.'s (TWX) stock. The Time Warner-owned studio is currently in talks with a Chinese investment fund, China Media Capital. They are planning to create a joint venture that would produce Chinese films.
This deal would have Warner Bros. making multiple films a year. The recent turmoil in China and the U.S. could be an obstacle for both companies -- when it comes to consumers and investors. That being said, even though China has had a difficult time controlling its economy, its box office take has been growing rapidly.
Here is the Time Warner stock 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.
Check out which stocks made the list. And when you're done, be sure to read about which mid-cap energy stocks you should buy now. Year-to-date returns are based on August 24, 2015 closing prices.
TWX data by YCharts
Time Warner Inc. (TWX)
Rating: Buy, B+
Market Cap: $50.7 billion
Year-to-date return: 17.8%
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.
"We rate TIME WARNER CABLE INC (TWC) a BUY. This is driven by some important positives, 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, solid stock price performance, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, TWC's share price has jumped by 26.77%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Net operating cash flow has remained constant at $1,698.00 million with no significant change when compared to the same quarter last year. This quarter, TIME WARNER CABLE INC's cash flow growth rate has remained relatively unchanged and is slightly below the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Media industry and the overall market, TIME WARNER CABLE INC's return on equity exceeds that of both the industry average and the S&P 500.
- TIME WARNER CABLE INC's earnings per share declined by 8.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TIME WARNER CABLE INC increased its bottom line by earning $7.17 versus $6.71 in the prior year. For the next year, the market is expecting a contraction of 8.3% in earnings ($6.58 versus $7.17).
- You can view the full analysis from the report here: TWC Ratings Report









