On today’s STOP TRADING segment on CNBC, Jim Cramer said he loves Discovery Holding Co. (DISCA) and thinks it should go private. He was very positive on this name before on one of his MAD MONEY episodes.
The problem is that the company is not at a price any "fiscally responsible buyer" would want to look at the company. It loses money and has negative cash flows at this point because of one-time items. The good news is that it is expected to make money this year and grow earnings next year. But it is essentially still on the cusp. The main reason for losses was because of one quarter last year, but the net earnings from operations probably price this out. A buyer at this point would mainly be a vanity buyer or a buyer that thinks he/she can run it leaner and meaner. It’s a good company and it has great assets, but at the end of the day a buyout is too expensive for a rational financial statement reader.
Jon C. Ogg
May 8, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in any of the companies he covers.
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