NEW YORK (TheStreet) -- Shares of Media General (MEG) were gaining 1.4% to $13.83 on heavy trading volume after activist investor Starboard Value sent a letter to the media company urging it to sell itself to Nexstar Broadcasting (NXST - Get Report) instead of acquiring Meredith MDP.

The activist investor, which owns a 4.5% in Media General, said the company's valuation of Meredith "does not seem to make financial sense," even if it makes "strategic sense." The investor noted that Media General is paying an implied 12 times average forward two-year EBITDA for Meredith's broadcasting business in its $2.4 billion deal.

Starboard said it reviewed Nexstar's recent $4.5 billion offer to acquire Media General "with great interest."

"We believe a combination of Nexstar and Media General is highly strategic," Starboard's letter said. "Nexstar management has a proven track record of execution and has created substantial value for its shareholders over the past five years. In addition, we believe Nexstar's estimated synergies of $75 million appear conservative with significant upside making any stock component of a transaction particularly attractive."

About 2.2 million shares of Media General were traded by 11:40 a.m. Tuesday, above the company's average trading volume of about 1.6 million shares a day.

TheStreet Ratings team rates MEDIA GENERAL INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

We rate MEDIA GENERAL INC (MEG) a SELL. This is based on the combination of unfavorable investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, unimpressive growth in net income, generally high debt management risk and feeble growth in its earnings per share.

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

  • The share price of MEDIA GENERAL INC has not done very well: it is down 18.90% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • 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 Media industry. The net income has significantly decreased by 75.9% when compared to the same quarter one year ago, falling from $6.79 million to $1.64 million.
  • Currently the debt-to-equity ratio of 1.55 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, MEG has managed to keep a strong quick ratio of 1.86, which demonstrates the ability to cover short-term cash needs.
  • MEDIA GENERAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, MEDIA GENERAL INC turned its bottom line around by earning $0.58 versus -$0.10 in the prior year. For the next year, the market is expecting a contraction of 60.3% in earnings ($0.23 versus $0.58).
  • The gross profit margin for MEDIA GENERAL INC is rather high; currently it is at 58.14%. Regardless of MEG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MEG's net profit margin of 0.51% is significantly lower than the industry average.
  • You can view the full analysis from the report here: MEG