Gannett Co., Inc. (NYSE:GCI) shares are up more than 9.27% this year and recently increased 4.22% or $0.43 to settle at $10.61. The New York Times Company (NYSE:NYT), on the other hand, is up 31.20% year to date as of 11/13/2017. It currently trades at $17.45 and has returned 0.87% during the past week.
Gannett Co., Inc. (NYSE:GCI) and The New York Times Company (NYSE:NYT) are the two most active stocks in the Publishing – Newspapers industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Comparatively, NYT is expected to grow at a 12.80% annual rate. All else equal, NYT’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. , compared to an EBITDA margin of 15.02% for The New York Times Company (NYT). GCI’s ROI is 5.20% while NYT has a ROI of 8.90%. The interpretation is that NYT’s business generates a higher return on investment than GCI’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. GCI’s free cash flow (“FCF”) per share for the trailing twelve months was -0.01. Comparatively, NYT’s free cash flow per share was +0.09. On a percent-of-sales basis, GCI’s free cash flow was -0.04% while NYT converted 0.94% of its revenues into cash flow. This means that, for a given level of sales, NYT is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. GCI has a current ratio of 1.10 compared to 1.80 for NYT. This means that NYT can more easily cover its most immediate liabilities over the next twelve months. GCI’s debt-to-equity ratio is 0.43 versus a D/E of 0.00 for NYT. GCI is therefore the more solvent of the two companies, and has lower financial risk.
GCI trades at a forward P/E of 11.69, a P/B of 1.39, and a P/S of 0.38, compared to a forward P/E of 23.64, a P/B of 3.08, and a P/S of 1.71 for NYT. GCI is the cheaper of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. GCI is currently priced at a -5.69% to its one-year price target of 11.25. Comparatively, NYT is 16.33% relative to its price target of 15.00. This suggests that GCI is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.70 for GCI and 3.20 for NYT, which implies that analysts are more bullish on the outlook for NYT.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. GCI has a short ratio of 12.11 compared to a short interest of 7.22 for NYT. This implies that the market is currently less bearish on the outlook for NYT.
The New York Times Company (NYSE:NYT) beats Gannett Co., Inc. (NYSE:GCI) on a total of 8 of the 14 factors compared between the two stocks. NYT , is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, GCI is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, NYT has better sentiment signals based on short interest.