NEW YORK (TheStreet) -- Shares of Starz (STRZA) are up 4,80% to $31 in pre-market trade after it was reported that executives with Rupert Murdoch's 21st Century Fox (FOXA) and Starz met yesterday to discuss a possible acquisition of the premium cable movie service, a deal that could expand Murdoch's reach into homes across the country, the Los Angeles Times reports.
Starz CEO Chris Albrecht and investment bankers held the discussion with Fox executives at the company's studio lot in Los Angeles, sources told the Times.
There's no deal yet, and none may materialize, sources added. A full acquisition of the company could be valued at more than $3.2 billion based on its share price of $29.58 Tuesday. Fox could also decide to take an ownership stake instead of buying Starz outright, the Times added.
TheStreet Ratings team rates STARZ as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate STARZ (STRZA) 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 increase in stock price during the past year, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- STARZ has improved earnings per share by 19.2% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, STARZ increased its bottom line by earning $2.04 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($2.24 versus $2.04).
- STRZA, with its decline in revenue, underperformed when compared the industry average of 8.0%. Since the same quarter one year prior, revenues fell by 20.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The debt-to-equity ratio is very high at 14.50 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, STRZA maintains a poor quick ratio of 0.93, which illustrates the inability to avoid short-term cash problems.
- Net operating cash flow has significantly decreased to $18.70 million or 74.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: STRZA Ratings Report