Shutterstock (SSTK, Financial) shares witnessed a notable surge, climbing 20.3% as investors responded to the news of its acquisition by Getty Images. The stock price moved to $36.15, reflecting investor optimism regarding the strategic implications of the deal.
Under the terms of the acquisition, Shutterstock shareholders are presented with three compensation options: receiving approximately $28.85 in cash per share, exchanging each share for about 13.67 shares of Getty Images (GETY) stock, or opting for a combination of 9.17 shares of GETY stock plus $9.50 in cash for each SSTK share held.
On the valuation front, the stock may seem undervalued based on its price-to-book (PB) ratio, which stands close to a 10-year low. Additionally, with a price-to-sales (PS) ratio near its decade low, SSTK appears attractively priced relative to its historical valuations. The GF Value of Shutterstock is assessed at approximately $59.36, indicating a potential upside from the current market price. More details and a comprehensive analysis can be found on the GF Value page.
Despite the positive market movement, investors should approach with caution. The company's financial strength is under scrutiny, with an Altman Z-score of 1.64, placing it in the distress zone and suggesting a potential risk of bankruptcy in the next two years. Furthermore, Shutterstock's return on invested capital is below its weighted average cost of capital (WACC), indicating possible inefficiencies in capital utilization.
On the growth side, Shutterstock has demonstrated consistent revenue and earnings growth, a positive signal for potential investors. The company's dividend yield is close to its 5-year high, providing an attractive return for income-focused investors. However, prospective shareholders should weigh these factors against the company's financial warnings before making investment decisions.
