Is $NYT a Good Deal or is a Competitor a Better? $GCI $MNI $WPO

The New York Times Company (NYT) publishes the New York Times, the popular national and regional paper. Jeffrey Ubben’s Valueact Capital, Ken Griffin’s Citadel Investment Group and Irving Kahn’s Kahn Brothers were fans of the company at the end of the second quarter. NYT recently reported third quarter earnings of $537.23M down from $554.33M the same quarter last year. It was able to increase its diluted net EPS to 10 cents a share from -3 cents a share third quarter last year. It recently traded at $6.90 a share. Opinions amongst analysts vary somewhat. One year target estimates range from $7 to $9, with a mean and median of $8. Further, 6 out of 9 analysts recommend the company as a hold, while 1 says strong buy, 1 says buy and 1 says underperform. VALUEACT CAPITAL

To get a better idea whether there is enough upside for NYT to warrant investment, let’s take a closer look at the company and its closest competitors – Gannett Co (GCI), the company that publishes USA Today, McClatchy Company (MNI), which publishes a variety of local and regional newspapers, and the Washington Post Company (WPO).


First, we will look at the P/E ratio. This metric divides a company’s share price by its earnings per share – the lower the number, the better. P/E ratio indicates how many times its earnings a company is trading at. If the P/E ratio is high, the stock could be overpriced, so the lower the better. Of the companies we looked at, MNI has the lowest Forward P/E at 3.57, followed by GCI at 5.13, NYT at 10.00 and WPO at 19.34.


We used beta as a measure of risk. A beta of 1.0 means that the stock moves with the market. The higher a stock’s beta, generally, the more volatile the stock, and, as a result, the more risky. A lower beta tends to indicate that the stock moves more independently from the market. WPO has the lowest beta of the companies we looked at. It has a beta of just 0.95. NYT is next at 1.60, followed by GCI at 2.44 and MNI at 3.15.


Next, let’s look at the earnings growth consistency and expectations. Earnings Growth Estimates can be wrong. In fact, they are frequently overstated, but they can be useful when comparing companies or comparing a company’s performance relative to its industry. Over the last five years, NYT’s earnings have shrunk -13.8% compared to industry losses of -11.9%. Over the next five years, NYT’s earnings are expected to fall -1% per annum, while the industry is expected to grow 10.6%. In contrast, WPO fell -8.03% over the last five years and is expected to grow 29.40% over the next five years. GCI shrunk -18.40% over the last five years. It is expected to grow 6% over the next five years. MNI fell -22.11% over the last five years and is expected to grow just 5% over the next five years. WPO has the strongest Earnings Growth Estimate.


Stocks that are favored by hedge funds tend to outperform the market by a few percentage points on the average. Of the companies we looked at, GCI was the most popular. Of the 300+ hedge funds we track, 25 had positions in GCI at the end of the second quarter. WPO was next at 20, followed by MNI at 18 and NYT at 13.


We like WPO best. It has the strongest Earnings Growth Estimate and the lowest beta. It also has a fair amount of hedge fund interest. Other companies with low beta and strong analyst recommendations include Berkshire Hathaway Inc (BRK-A) and Synopsys Inc (SNPS).