Should You Buy Martha Stewart’s Company?

June 02, 2011 1:23 AM

Martha Stewart and Living Magazine on the iPad

Martha Stewart Living Omnimedia, founded by Martha Stewart and made up of publishing, digital, broadcast and merchandising divisions, might be up for sale soon.

Bloomberg reported that a sale could double the share price, which had dropped a whopping 88% after Martha served 5 months in prison and 6 months under house arrest in 2006 for insider trading. Last week the company hired the Blackstone Group as consultants to find new ventures for the company or potentially sell it.

CNBC quoted Martha saying “Everything depends on what it is. We’re a valuable company and we have very valuable assets… What we’re hearing each and every day is content is still one of the most valuable things companies can have. We are loaded with extraordinarily good content… All options are open.”

Never ones to pass up a good sale, we asked our finance writer, Chris Ordolis, if now was the time to invest in MSO shares, especially since we love the brand.

These were his thoughts*:

Without crunching the numbers or looking too deep into the company’s financials, I would ride the bench on this play. Martha Stewart’s Omnimedia has been transitioning from the maturity phase to the decline phase over the last several years. Here are a few key points to take note of: operating income and revenue have gone down over the last three years and the company has reported losses; they had negative earnings in three of the last four quarters; they have missed earnings estimates twice in the last three quarters; the company has only slightly recovered from Martha’s 2006 insider trading scandal according to the Brand Loyalty Index. Martha is a savvy entrepreneur and a sophisticated investor, and if she’s looking for other business opportunities and heading for the exit, I wouldn’t be looking to come in on this deal. Sure some people may profit on a short term trade here, if talented firm Blackstone Group is successful in finding a bidder, but for the average investor out there, I would be wary and think twice before trading on the hype.

That being said, if Martha Stewart and the Blackstone Group are indeed looking for new ventures, we want them to know that is open for business.

Download Martha Stewart’s Living magazine for the iPad, as featured in the image above.

* Please consult your financial advisor before making any investment decisions.


2 Responses to Should You Buy Martha Stewart’s Company?

  1. Tits on June 15, 2011 at 12:40 AM

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  2. Augustine Wratchford on July 20, 2011 at 4:39 PM

    Les Ferdinand