Gemstar-TV Guide International (NASDAQ:GMST) recently was initiated with a strong buy rating at research firm Think Equity. The rating is because the analyst believes the company is ideally placed as a leader in the interactive TV programming guide business. I disagree, though, that Gemstar should be so highly rated.

You may be familiar with Gemstar from its primary business, publishing TV Guide magazine. In addition to the magazine, it also has TV Guide channel, VCRplus, TV Games Network (which features horse racing), and SkyMall.

Gemstar got swept up in the Internet bubble back in 1999 and early 2000 because of the potentially interactive nature of its on-screen guides and services. The stock peaked at $105 on March 10, 2000. Many smart people touted Gemstar during that time. They all turned out to be wrong; the stock has cascaded lower ever since except for a massive sucker's rally in the summer of 2000.

This history lesson takes us to where the stock is now. It is a $4 stock, and the company is expected to lose $0.11 this year despite earning $0.05 in its first quarter. Estimates call for next year to be profitable, with earnings of $0.11. Every statistic for measuring a stock makes Gemstar look expensive. It trades at 42 times next year's earnings, twice its book value, and almost five times sales. The one positive that stands out is that the company has $1.14 in cash.

Gemstar derives almost half of its revenue from publishing TV Guide. That might be OK except that revenue from that segment has been declining. The licensing and cable segments have had increasing revenue to help offset declines in publishing.

Here's the point about Gemstar. How many of the people you know read TV Guide? The company says the magazine has 9 million subscribers, but that doesn't sound like a lot when you consider the trend has been down. Do you watch the TV Guide channel? I don't even know if I have it in my house (we have DirecTV (NYSE:DTV)). Do you go to TV Guide's website to see what's on TV? I didn't know it had a website with listings until I researched this article.

Investors in Gemstar are relying on licensing and advertising for the success of their company. There are better companies to own that get this type of revenue, though. Nothing leads me to conclude that Gemstar can maintain earnings and revenue growth that will outpace the market for any length of time.

The bottom line is that I don't understand how this company's business will grow. Peter Lynch has preached for years about understanding what you own. Well, in this case, the business itself is easy to understand, but its investment merits are not. That's not a compelling combination.

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Fool contributor Roger Nusbaum is an investment manager and wildland firefighter in Prescott, Ariz. At press time, neither he nor his clients owned any of the stocks mentioned.