A year ago, I recommended TheStreet stock at $2.04 (dividend adjusted) after the company reported FY2013 2nd quarter financials for the period ending June 30,2013 and announced a 25% increase in Free Cash Flow.
"Revenue in the second quarter of 2014 was $14.8 million, an increase of 9.5% from $13.5 million in the prior year period."
"The Company generated $2.0 million in operating cash flow for the six months ended June 30, 2014, compared to $1.2 million in operating cash flow for the prior year period."
"The Company ended the quarter with cash and cash equivalents, restricted cash and marketable securities of $59.1 million."
Operational Cash Flow for the 6 months ending June 30,2014 increased to over $2 million vs $1.1 million in the comparable 6 month period from a year ago. What makes the increase even more impressive is that company pays a $0.10 dividend, which is nearly a 4% yield at current market prices. In excess of $3 million per year.
There has been a recent shakeup in the online financial sector space:
- Seeking Alpha and Yahoo cutting ties.
- Howard Lindzon changing hats at StockTwits , the company he founded.
- Phil Pearlman leaving StockTwits for Yahoo Finance.
- Greg Harmon a top StockTwits contributor signed up in July to be a Yahoo Finance Contributor
- Todd Harrison recently announcing his plans to sell Minyanville
I believe the TheStreet is a prime acquisition candidate for bigger media entities that would find it easier to buy the subscription distribution base and advertising model of the TheStreet vs. creating and building out their own.
Possible suitors for TheStreet, in my opinion, are:
- Gannet (NYSE:GCI), as famous as the USA Today newspapers are today, their online financial Money presence is very weak.
- Comcast (NASDAQ:CMCSA) has high visibility in the financial arena with their CNBC TV programming, but their online presence is weak.
- Yahoo (NASDAQ:YHOO) has one of the most popular online financial news web sites on the entire web, while its advertising model is tremendous they fail to earn much revenue from a premium subscriber base like TheStreet.
- CBS Marketwatch was acquired by Dow Jones (NYSEARCA:DIA).
- 2007 Thomson Corp and Reuters Corp merged to become Thomson Reuters Corporation (NYSE:TRI).
The current market capitalization of TheStreet:
- 34,439,149 shares outstanding
- closing stock price $2.49
- Market Capitalization: $85 million
- total cash & marketable Securities : $59 million
- Dividend Paid: $3.8 million
- Debt: Zero
Subtracting the net cash position and annual dividend paid from the entire market capitalization, the underlying company is valued at $22 million.
TheStreet's underlying business in my opinion, (aside from its franchise value) should trade at an operational cash flow multiple of a minimum 25 times $4million = $100 million. In other words, I believe the underlying business which is currently valued at approximately $22 million should be trading 5 times higher at $100 million alone, which would have the common stock valued at nearly $6.00 per share. (Or a total market capitalization of $160 million.)
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
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