NEW YORK (TheStreet) -- Shares of AOL (AOL) are up 0.60% to $45.50 in pre-market trade after it was reported that at least two top 10 Yahoo (YHOO)  shareholders are so unhappy with Chief Executive Marissa Mayer's turnaround efforts that they are making a direct plea to AOL CEO Tim Armstrong to explore a merger and run the combined company, Reuters reports.

Their move follows an activist campaign by hedge fund Starboard Value LP, which is pushing Yahoo to consider a deal with AOL and unlock Yahoo's valuable stakes in Asian Web companies, Reuters said.

Armstrong has been receptive to these Yahoo shareholders and acknowledged the potential benefits of a deal, the Yahoo investors said, according to Reuters.

 

TheStreet Ratings team rates AOL INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate AOL INC (AOL) 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 and good cash flow from operations. We feel these 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:

  • AOL's revenue growth trails the industry average of 27.5%. Since the same quarter one year prior, revenues rose by 12.1%. 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.
  • Although AOL's debt-to-equity ratio of 0.10 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $125.90 million or 40.82% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 25.25%.
  • AOL INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AOL INC reported lower earnings of $1.12 versus $11.02 in the prior year. This year, the market expects an improvement in earnings ($2.01 versus $1.12).
  • You can view the full analysis from the report here: AOL Ratings Report
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