Gannett Company Inc. Annual Valuation – 2014 $GCI

500px-Gannett_logo_2011.svgBenjamin 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 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  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 specific look at how Gannett Company Inc. (GCI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Gannett Co., Inc., is an international media and marketing solutions company, delivering content and services across an integrated, multiplatform portfolio. The Company provides access to content on many different platforms, provides digital marketing services to businesses, and provides Internet-based human resource solutions. In February 2014, the Company completes the sale of KMOV-TV in St. Louis, MO, to Meredith Corp. In May 2014, the Company purchased HotelMe, Website providing authenticated user-generated hotel reviews. In July 2014, Gannett Co Inc acquired six of London Broadcasting company’s television stations in Texas, which include KCEN (NBC) in Waco-Temple-Bryan, KYTX (CBS) in Tyler-Longview, KIII (ABC) in Corpus Christi, KBMT (ABC) and its digital sub-channel KJAC (NBC) in Beaumont-Port Arthur, KXVA (FOX) in Abilene-Sweetwater and KIDY (FOX) in San Angelo.
GCI Chart

GCI data by YCharts

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 = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - FAIL
  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 $33.61
MG Value $78.90
MG Opinion Undervalued
Value Based on 3% Growth $29.72
Value Based on 0% Growth $17.42
Market Implied Growth Rate 3.95%
Net Current Asset Value (NCAV) -$21.39
PEmg 16.40
Current Ratio 1.46
PB Ratio 2.65

Balance Sheet – 6/29/2014

Current Assets $1,462,600,000
Current Liabilities $1,005,100,000
Total Debt $3,446,700,000
Total Assets $9,147,600,000
Intangible Assets $5,271,300,000
Total Liabilities $6,289,500,000
Outstanding Shares 225,650,000

Earnings Per Share

2014 (estimate) $2.52
2013 $1.66
2012 $1.79
2011 $1.89
2010 $2.35
2009 $1.51
2008 -$29.11
2007 $4.17
2006 $4.90
2005 $4.92
2004 $4.92

Earnings Per Share – ModernGraham

2014 (estimate) $2.05
2013 $1.82
2012 -$0.17
2011 -$2.04
2010 -$3.75
2009 -$5.44

Dividend  History
GCI Dividend Chart

GCI Dividend data by YCharts


Gannett Company no longer qualifies for the Enterprising Investor or the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the lack of earnings stability or growth over the last ten years.  The Enterprising Investor is no longer interested due to the drop in current ratio over the last quarter.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $3.75 in 2010 to an estimated gain of $2.05 for 2014.  This strong level of demonstrated growth outpaces the market’s implied estimate of 3.95% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of Gannett Company Inc. (GCI) for more perspective!

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 Gannett Company (GCI)?  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 Gannett Company (GCI) or in any other 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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