Is Tivo Heading In the Right Direction?

With shares of Tivo (NASDAQ:TIVO) trading at around $13.09, is TIVO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Tivo recently beat Q1 expectations. EPS came in at -$0.09 on $82.6 million in revenue. Analysts expected -$0.14 on $78.3 million in revenue. On a year-over-year basis, the loss narrowed and revenue increased. Tivo saw the largest MSO subscription increase in over seven years. It signed a distribution deal with Atlantic Broadband (twelfth largest U.S. MSO), it launched a “What to What” feature on Apple Inc.’s (NASDAQ:AAPL) iPad Mini, and it announced that its patent trial with Motorola is set to begin on June 10.

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Tom Rogers, President and CEO of TiVo, said, “The solid financial results this quarter were the outcome of strong operational execution across our business. Our advanced television innovation is helping to drive the global adoption of TiVo as we increased our MSO subscription base by 277,000 subscriptions, our strongest quarter of MSO subscription additions in seven years. We delivered 13 percent year-over-year service and technology revenue growth and reported an Adjusted EBITDA profit, which significantly exceeded our guidance. As a result, we continue to believe that we should be Adjusted EBITDA profitable, even when including litigation spend, for Fiscal 2014.”

That’s the good news. The bad news is that Tivo consistently loses money. Promises are often made, but where are the actual results, as in profits? Is management the problem? According to Glassdoor.com, employees have rated their employer a 3.0 of 5, which is average. The concerning stats are that only 50 percent of employees would recommend the company to a friend and that only 42 percent of employees approve of CEO Tom Rogers.

The following are two quotes from employees on Glassdoor.com:

April 1: “Good company going down.”

May 19: “Good time on a slowly sinking ship.”

Ouch!

Below is a chart comparing fundamentals for Tivo, Dish Network Corp. (NASDAQ:DISH), and Comcast Corporation (NASDAQ:CMCSA).

TIVO DISH CMCSA
Trailing P/E N/A 36.02 17.71
Forward P/E N/A 17.37 15.11
Profit Margin -1.73% 3.46% 10.18%
ROE -1.61% 360.32% 14.21%
Operating Cash Flow 47.29M 1.84B 14.83B
Dividend Yield N/A N/A 1.80%
Short Position 10.80% 2.10% 1.10%

Let’s take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Strong

Tivo has underperformed its peers over a three-year time frame, but the past month has been strong.

1 Month Year-To-Date 1 Year 3 Year
TIVO 19.80% 6.66% 41.49% 48.53%
DISH 0.82% 8.02% 41.89% 110.7%
CMCSA 3.57% 12.97% 51.41% 165.3%

At $13.09, Tivo is trading well above its averages.

50-Day SMA 11.75
200-Day SMA 12.00
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E = Equity to Debt Ratio is Strong

The debt-to-equity ratio for Tivo is stronger than the industry average of 2.60.

Debt-To-Equity Cash Long-Term Debt
TIVO 0.51 627.24M 172.50M
DISH 0.03 7.10B 11.88B
CMCSA 0.95 4.68B 47.23B

E = Earnings Have Been Inconsistent

Tivo is simply unable to deliver consistent profits. Revenue provides at least some reason for hope.

Fiscal Year 2009 2010 2011 2012 2013
Revenue ($) in millions 250 238 220 238 304
Diluted EPS ($) 1.01 -0.23 -0.74 0.80 -0.04

When we look at the last quarter on a year-over-year basis, we see an increase in revenue and a narrowed loss. However, it’s still a loss.

Quarter Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012 Jan. 31, 2013
Revenue ($) in millions 67.77 65.26 82.03 88.86
Diluted EPS ($) -0.17 -0.23 0.44 -0.13

Now let’s take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

Conclusion

Analysts like the stock: 15 Buy, 1 Hold, 0 Sell. However, when profits are scarce and employees aren’t confident in the direction of the company or their leader, there is significant cause for concern. Patent settlements have helped Tivo, but experienced investors want organic growth and consistent profits.

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Tivo is a WAIT AND SEE.

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All content posted should not be considered professional advice. Please do your own research and consult with a professional financial advisor before making any investment decisions.

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