Failing, Mr T? The share price begs to differ. Can $NYT make your portfolio Great?
Key Stats for New York Times Co
| Ticker | NYT |
|---|---|
| Sector | Newspaper Publishing |
| Latest price | $16.85 |
| Value | $2,719M |
| Daily vol | $28M |
| Date | 18 May 2017 |
| Links | Yahoo Finance, SEC Edgar, nytco.com |
1. Is it more than a newspaper?
The New York Times Company is a media company focused on creating, collecting and distributing news and information. All though the NYT brand is in print and online is the key brand, they do also syndicate their content, have a stable of non-news websites, and have an events division. Though none of these are big enough to merit a separate reporting line.
And the brand gets stronger and stronger, not just in the US but globally. The NYT has over 120m monthly visitors, of which 85m are in the US. There are 3m paid subscribers, of which nearly 2m are digital only. They even have a corporate subscription business that is 7% of digital revenue.
Impressive for a business that seems to be so threatened by the internet!
A tough market!
On the print side, they are constantly battling with the WSJ and USAToday. Internationally they face the FT, Bloomberg and Economist. Digitally the readership is more fractured with a choice of WSJ.com, washingtonpost.com, Google News, Yahoo! News, huffingtonpost.com, MSNBC.com, CNN.com, bbc.co.uk, guardian.co.uk, ft.com, economist.com and reuters.com.
Though maybe we need to think beyond direct competitors... as there is a competition for people's time, e.g. from Facebook etc, and entertainment businesses, not just in terms of serving people quality journalism.
And the numbers?
But the good news hasn't come thro' in the figures. to date. Sales and profits are flat. EPS is yoyoing with exceptional items, and dividends are "stuck".
| Metric | 2016A | 2015A | 2014A | 2013A | 2012A |
|---|---|---|---|---|---|
| Revenue | $1.6bn | $1.6bn | $1.6bn | $1.6bn | $1.6bn |
| Operating profit | $0.1bn | $0.1bn | $0.1bn | $0.2bn | $0.1bn |
| EPS | $0.18 | $0.38 | $0.33 | $0.43 | $0.92 |
| DPS | $0.16 | $0.16 | $0.16 | $0.08 | $0.00 |
Now, maybe that's too harsh, as Wall Street's a little more positive on the future, with margins expected to help boost earnings.
| Metric | 2016A | 2017E | 2018E |
|---|---|---|---|
| Revenue | $1.6bn | $1.6bn | $1.7bn |
| EPS | $0.18 | $0.64 | $0.70 |
| DPS | $0.16 | $0.08 | N/A |
In fact, the brokers have been upgrading their forecasts the last month or so, though for some reason they still are expect dividends to remain low.
Shareholder friendly?
Few dividends, no buybacks, and two classes of shares? Hmmm... that's not that friendly.
Though at least there is a net cash position = 11% of the share price. that gives the NYT some protection against any nasty secular or economic surprises! Too often I've seen newspapers treated as cash cows, heavily indebted and them spiralling down.
2. How's the biz compare?
There really isn't a great peer list of large consumer publishers to judge the NYT by, with no $10bn revenue or value company :( That said, the NYT has margins at the higher end of the spectrum.
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| New York Times Co | $1,575M | 14% | 6% |
| News Corp | $8,285M | 11% | -2% |
| Meredith Corporation | $1,704M | 22% | 6% |
| Time Inc | $3,022M | 13% | -4% |
| Gannett Co Inc | $3,162M | 13% | 2% |
| New Media Investment Group Inc | $1,263M | 11% | 3% |
Then again, comparing them to Disney, Comcast, Viacom or Fox isn't valid either, as they are really diverse, large and liquid. :(
So, what does the high margin do for their valuation? Bumps it up... of course! In fact, the NYT's seen its valuation expand recently, along with it's earnings.
Which is a sharp contrast to others like NewsCorp and Tronc who's price is staying high regardless of declining earnings.
| Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | Leverage ratio |
|---|---|---|---|---|---|
| NYT | $2,719M | 26x | 14% | 0% | net cash |
| NWSA.O | $7,444M | 34x | 7% | 2% | net cash |
| MDP | $2,317M | 13x | 5% | 4% | 2x |
| TIME.K | $1,189M | 10x | 5% | 4% | 3x |
| GCI | $849M | 7x | N/A | 9% | 1x |
| NEWM.K | $636M | 17x | N/A | 12% | 2x |
| TRNC.O | $363M | 44x | N/A | 0% | 1x |
But, nice as that sounds, and great to see that analysts believe it has the best long-term potential, but I struggle to see why 26x forward earnings are justified.
3. And Wall Street thinks?
In fact the stock's traded between 20x and 30x earnings in the last year. We've been two previous bouts of optimism on earnings in Nov 2015 and May 2016, only to be rudely disappointed.
Therefore, I am not surprised that Wall Street is cautious with a Hold recommendation and a $13.70 price target. Ouch, that's 20% below today's price.
And let's look an the analogy of the Economist, a recent private deal valued it at $1.5bn versus its sales of $500m and operating profit of $100m. i.e. not far off the NYT's in terms of cashflow.
4. Failing to Fall?
I'm failing to fall for the NYT's stock. Sorry. I'll keep reading it online, buying the International NYT when I'm travelling, but... the stock at $17, looks like a mis-print.
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Disclosure: I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare works at a financial website, Stockflare, and is a Chartered Financial Analyst.
Submitted May 18, 2017 at 12:30PM by shane_stockflare http://ift.tt/2rvEMwK
