NEW YORK (TheStreet) -- Charter Communications (CHTR) was falling 5.98% to $129.35 on Thursday afternoon after the announcement that Comcast (CMCSA) would acquire Time Warner (TWC) in one of the biggest deals of the year.
The deal caused other cable companies, such as Cablevision (CVC), to drop on Thursday. Charter had publicly sought to acquire all or part of Time Warner for months, and the maneuver would have helped the company close the gap between itself and Comcast, the largest cable provider in the U.S. Instead, the deal combines Comcast with the second-largest cable provider in the country in a move that could drastically alter the media landscape.
Charter had a volume of more than 8 million shares around 3 p.m. on Thursday, well above its average of 1.1 million shares.
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TheStreet Ratings team rates CHARTER COMMUNICATIONS INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHARTER COMMUNICATIONS INC (CHTR) 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 revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CHTR's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 12.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 68.41% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The debt-to-equity ratio is very high at 234.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.20, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Media industry and the overall market, CHARTER COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: CHTR Ratings Report