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Tegna Inc. Analysis – August 2015 Update $TGNA

220px-TEGNA_LogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Tegna Inc. (TGNA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): TEGNA Inc., formerly Gannett Co., Inc. is a media and marketing solutions company. The Company is engaged in providing local content on a range of platforms in the United States. The Company operates through business segments: Broadcasting and Digital. It also provides digital marketing services and Internet-based human resource solutions. Its digital media products and services include search, social media and Website development, among others. The Company offers its services in a range of geographies, demographics and content areas. It provides consumers with the information and entertainment, and connects them to their communities through the platforms, including television stations, desktop, smartphone and tablet products. Its Broadcasting segment includes an independent station group of network affiliates. The Company’s Digital business segment includes Cars.com, CareerBuilder, PointRoll and Shoplocal.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $26.58
MG Value $96.43
MG Opinion Undervalued
Value Based on 3% Growth $36.32
Value Based on 0% Growth $21.29
Market Implied Growth Rate 1.06%
Net Current Asset Value (NCAV) -$26.35
PEmg 10.61
Current Ratio 1.53
PB Ratio 1.83

Balance Sheet – June 2015

Current Assets $1,616,000,000
Current Liabilities $1,055,000,000
Total Debt $4,453,000,000
Total Assets $11,094,000,000
Intangible Assets $7,745,000,000
Total Liabilities $7,727,000,000
Outstanding Shares 231,900,000

Earnings Per Share

2015 (estimate) $1.76
2014 $4.58
2013 $1.66
2012 $1.79
2011 $1.89
2010 $2.43
2009 $1.51
2008 -$29.11
2007 $4.52
2006 $4.90
2005 $5.06

Earnings Per Share – ModernGraham

2015 (estimate) $2.50
2014 $2.74
2013 $1.83
2012 -$0.15
2011 -$2.00
2010 -$3.68

Dividend History

Free Cash Flow

Conclusion:

Tegna Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the low current ratio.  The Enterprising Investor is concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $2.00 in 2011 to an estimated gain of $2.50 for 2015.  This level of demonstrated earnings growth surpasses the market’s implied estimate of 1.06% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Tegna Inc. (TGNA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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