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TheStreet.com (NASDAQ:TST) earnings are out, and Wall Street was disappointed. Nothing new here. Wall Street has been sour on TheStreet for years because the company has generally operated in a fashion that enriched executives at the expense of shareholders. But TheStreet has made a HUGE change. So, are TheStreet shares worth buying now?
Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Elizabeth DeMarse is THE Catalyst for the Stock’s Movement
Stocks don’t move without catalysts. In TheStreet’s case, the major catalyst is new CEO Elizabeth DeMarse. DeMarse is an incredibly savvy business woman with a track record of success regarding business related websites. Elizabeth minted money and built world-class businesses at both Bankrate (NYSE:RATE) and CreditCards.com. In short, she is a business builder who brings an entirely new mindset to TheStreet: cut the fat and cronyism, then generate cash like a company should with a high CPM business and large base of subscription revenue.
DeMarse has already started dishing out pink slips to those leaching off TheStreet. The cuts are going to get deeper in the quarters to come, and this will easily help the company deliver positive earnings.
E = TheStreet’s Equity to Debt Ratio is Zero
Long time Wall St. Cheat Sheet followers know this is one of our favorite metrics for measuring a company’s value. Despite all the woes TheStreet has had generating a multiple of revenues on their costs, the company still has zero debt. This is the ideal environment for a turnaround CEO to generate sweet returns once the fat is cut.
A = A-Level Management Runs the Company
It’s worth repeating: TheStreet has had some shitty executives. The company has also had some unflattering investigations. However, we grade Elizabeth as A-Level Management. As she continues cleaning house, we expect her clean up team to look a lot more like an A+.
T = Technicals on the Stock Chart are Strong
Well, the technicals for TST are definitely not strong. However, the stock has really hit a general bottom. So, at this point it either evaporates or begins to rally from a base. We think the latter is most likely given the fundamental moves.
S = Support is Provided By Institutional Investors & Company Insiders
Director Vivek Shah and new CEO Elizabeth DeMarse are putting money where the mouth is. They have purchased 100,000 shares in addition to their previous positions and stock options.
T = Trends Support the Industry in which the Company Operates
Media is hot. CPMs are rising and financial media generates the highest CPMs of any vertical in media. With that said, DeMarse is riding a positive trend which has only strengthened since the Great Crash of 2008.
So, is TheStreet a buy? Seems so from our vantage point. If you nibble on some shares and tuck them away for a year or two, the variables above indicate you’ll be a winner. Oh yeah, and you get a 5.6% dividend in the meantime.
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