Your assessment in a paragraph or two. This should take no more than fifteen minutes. Would you buy, sell or pray? What say you on the outlook for the “Grey Lady?” Why?
Postscript: A reader submits an A+ response:
Nearly every metric that should be increasing has declined and vice versa. Management is trying to put lipstick on a pig. (CSInvesting: You have captured the jist!)
Print and digital advertising revenues decreased 13.3 percent and 4.0 percent, respectively, largely due to ongoing secular trends and an increasingly complex and fragmented digital advertising marketplace. In the first quarter of 2013, digital advertising revenues were $46.5 million compared with $48.5 million in the 2012 first quarter. Digital advertising revenues as a percentage of total Company advertising revenues were 24.3 percent in the first quarter of 2013 compared with 22.5 percent in the first quarter of 2012.
This paragraph really speaks to me. Management admits that the business is fundamentally changing, and not necessarily for the better. Ad rev was down even though it makes up a larger portion of overall revenue. That says there are some fundamental issues with the industry. NYT would have to go in the “too hard” pile, because based on this commentary, I don’t feel like I’d know where the business would be in 5 or ten years from now. Also, ongoing pension funding cannot be a good thing. I don’t think newspapers are going away, but they will become more of a novelty and read just because people “like the feel of holding a paper.” I don’t like to read everything online, so I just print stuff out, but on occasion I like to pick up a paper copy of WSJ or Barron’s just for fun. But that’s just me. Also I felt like they were selling business lines and investments to stay afloat, i.e. sale of Fenway Sports units? (Clear the decks of the Titantic)
From Value Line:
- Sales per share: down every year since 2005.
- Cash flow per share: seems to have peaked in 2000 and been choppy with downward trajectory every year since.
- Dividend: eliminated in 2009 and no indication its coming back.
- Capital Spending per share: they did make significant progress in reducing spending by shifting to digital driven model around 08.
- Shares outstanding: share count higher now than it was in 2004. Margins: stayed the same even though cap ex decreased dramatically.
CSInvesting: I would mention the poor returns on capital for such a large and established business, sub 10% means that the market price should NOT be much above its asset value. Poor returns on assets means that growth won’t help increase value.
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