Why China Digital TV Holding (STV) Stock Is Up Today

NEW YORK (TheStreet) -- China Digital TV Holding (STV) stock is spiking after reaching a framework agreement with Cinda Investment.

Under the terms of the agreement, China Digital TV will inject its CA, Network Broadcasting platform and VOD business into Shanghai Tongda Venture Capital, a company controlled by Cinda Investment. In exchange, China Digital TV will acquire a controlling stake in Tongda Venture and receive RMB1.15 billion in cash. 

By midday, shares had added 15.6% to $4.37. Trading volume of 1.4 million shares was nearly five times its three-month daily average. 

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Separately, TheStreet Ratings team rates CHINA DIGITALTV HLDG CO -ADS as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINA DIGITALTV HLDG CO -ADS (STV) 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 solid stock price performance, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, STV's share price has jumped by 105.06%, exceeding the performance of the broader market during that same time frame. Although STV had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • STV's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.28, which clearly demonstrates the ability to cover short-term cash needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, CHINA DIGITALTV HLDG CO -ADS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • STV, with its decline in revenue, underperformed when compared the industry average of 4.3%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 48.3% when compared to the same quarter one year ago, falling from $7.84 million to $4.06 million.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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