From 12/28 Barrons:
CBS so far hasn't gotten any real lift from its public sale earlier this month of a 20% interest in its radio operations, Infinity Broadcasting.
Since the initial public offering of Infinity, CBS is up 9/16 to 30 9/16, while Infinity has risen almost six points to 26 3/8 . As the largest radio operator in the country, Infinity is generating more excitement than CBS because radio is popular with investors while TV isn't.
Yet given Infinity's high valuation based on its cash flow, some think CBS is the better buy. At current prices, investors purchasing CBS are effectively paying about $4.50 a share for the company's non-radio business, including its TV stations, cable operations and the CBS network. That works out to a modest seven times projected 1999 cash flow. If those businesses were accorded multiples in line with those of CBS's peers, CBS stock could rise six to eight points. (emphasis added)
(Ed. note) The 6 to 8 point reference is conservative, based on relative multiples. It could be more like 8 to 12. If INF is fairly priced, CBS is grossly undervalued. Even if INF is moderately overpriced, CBS is undervalued at $30 9/16. Remember, over the ST, the market can and will be inefficient. The punch line is that it is viciously efficient over the longer term. Lets see how long it takes. Certainly, information such as that published by Merril Lynch last week and Barron's this weekend is what, over time, makes the market efficient.
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