Sunday, July 22, 2007 0 comments ++[ CLICK TO COMMENT ]++

New York Times... Getting Cheaper

Newspapers are facing their worst crsis since The Great Depression, so this is one area to look at for contrarian investors. One of the problems in this area is that the premium newspaper stocks (these are the ones I would look at since they are the ones that can easily transfer their brand online) tend to trade at high valuations. Similar to other glamour industries like sports teams, newspapers have always been given a high valuation by investors. So, even though papers are facing a big crisis, they are not necessarily attractive.

One of the ones I find attractive, New York Times Co (NYT), is trading at 4x book value for example. Nevertheless, I think the valuation is getting cheaper and will hit a point where it is worth looking into. Here is a 10yr valuation comparison courtesy Morningstar:

Although price-to-book-value is still high, price-to-sales and and price-to-cashflow are hitting more attractive values. I think Price/Sales below 1, which may happen soon, will make this company attractive.

Even if valuations hit attractive levels, I may still pass on this (and other) newspaper companies because ownership is held by family members through a dual-share structure. This isn't a bad thing per se but it can lead to governance issues.

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