(MONEY Magazine) – VIACOM (VIAB); AMEX, $39.50; NO YIELD

Few investors considered it a buy signal in January when Viacom's 72-year-old chairman Sumner Redstone suddenly fired his widely respected CEO, Frank Biondi, and took over himself. Indeed, many investors had already been backing away from the $12.6 billion media giant. Profit margins were being squeezed at its largest division, Blockbuster Entertainment, and the company's newly acquired film studio, Paramount, had just laid a nestful of box office eggs, including Jade and Sabrina. So why talk about Viacom now?

In a phrase: turnaround potential. Analysts forecast 15% growth in 1996 cash flow (the measure used to compare the large entertainment companies) vs. about 13% at mighty Walt Disney. "Viacom sells at nine times cash flow when its growth rate suggests it should be selling at least at 12 times," says Jessica Reif, managing director at Merrill Lynch. "I'd call this a buying opportunity." Other analysts concur, saying there's nothing wrong with Paramount that a box office hit or two couldn't fix. They are hungrily eyeing the studio's big summer release, Mission: Impossible. The Tom Cruise flick is expected to gross at least $150 million domestically. And the studio thinks it has another winner in its eighth Star Trek adventure. Talk about Enterprise: The starship's 1994 voyage grossed $76 million in the U.S.

Blockbuster, which generates about two-thirds of the company's cash flow, also may be on the mend. UBS Securities analyst Ed Hatch believes that Blockbuster's plans to open more than 500 new stores worldwide this year can increase its cash flow by 17% and help increase its share of the rental market from 25% to 30%. Hatch also estimates that Viacom's other prize assets, the MTV, VH1 and Nickelodeon cable networks, which contribute about one-fifth of the corporation's cash flow, will continue to grow about 19%, thanks to their tight grip on the attention of free-spending teens and young adults.

Then there's Redstone. "He's got credibility," says Scott Black, chief investment strategist at the money manager Delphi Management. Black notes that Redstone began with a handful of movie theaters and now owns 25% of an entertainment giant. Hatch's prediction: Viacom will hit $55 within 18 months.

--Jeanhee Kim