Investing in Shares & Property

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Should you invest in CCI?

Let me start with some of the eyes – the capture of metrics that can lead to an investor considering the purchase of shares of the Journal Register Company (JRC). The newspaper company has a price – to – earnings of 11.3, a price – to – sales of 0.93, a 5-year return on capital average of 17.6% and a five-year average profit margin before tax of 27.4%.

Now for the bad news. The Journal Register Company has a enterprise value – a – EBITDA of 9.07 and an enterprise value – to – income ratio of 2.24. Obviously, this company is taking a lot of debt. Therefore, perhaps multiples in the common stock price is misleading.

Before going further, let me take a moment to point out the fact that in the case of Journal Register, purchase shares are literally ordinary shares, ie, security is common to all owners. This is a rarity in the publishing business, where Families often keep control of their newspapers through the ownership of a class of shares with (much) more voting rights.

So, how should an investor value the Official Trade Register? If the use of ITC market cap or enterprise value? I usually have promoted a thorough and careful of all debt to making any investment. In the case of ITC, the debt constitutes a large portion of the enterprise value of the company. Is it really better to both sum of debt and equity together to determine the true price of Journal Register is selling?

I think it is.

There are situations in which the influence inherent in a debt – heavy capital structure works to the benefit of the holder of common stock. The most obvious example is a high degree of leverage, the company sales growing at a bargain price. The increase in revenues is amplified by the fixed debt, because debt creates a kind of equilibrium, like a traditional fixed cost. And greater production can give huge benefits to the owner of a large plant, sales or higher can give huge benefits to the owner of a big store, more profit before tax before financial expenses can provide a tremendous benefit to owners of common stock.

Does this scenario apply to Journal Register? Maybe, but I do not think so. Long – term, the economics of the business of newspapers is likely to be quite poor. Even Journal Register properties, I am projecting a drop in traffic with no end in sight. Some may disagree with this assessment. However, I believe they are being overly optimistic. Past performance is only a good estimate of future performance insofar as the future resembles the past. I think the future of newspaper publishing will sufficiently different from the past to make any estimate of future results Journal Register based solely on past performance rather inaccurate. Thus, for the most part, the influence inherent in Register Journal capital structure that will work against time – the investor term.

Economically, the assets of Journal Register are taxed. The legal reality is irrelevant to the shareholder. The company can not sell their assets without paying any debt or maintain control over the free flow of sufficient cash to meet its obligations. Today, money is cheap. It may not be so cheap in the future. Journal Register is insulated from interest rate fluctuations of their current loans. However, the company can not guarantee that, if it were to refinance its debt, which were met, charges would continue to be so low and today. This is true for all companies, but takes on greater importance in the case of Journal Register Company, because of the company's heavy debt structure capital, on today's interest rates historically low, and foreseeable trend of the group of newspaper circulation.

Together, these three factors form a kind of perfect storm. But it is important that the facts be assessed calmly. No need to exaggerate. The Journal Register Company is not in any serious danger. There would be no risk of insolvency if the company does not borrow further, and committed its free cash flow important to pay your debt. Looking back suggests the company is unlikely to follow the conservative course. That's not necessarily a bad thing.

There may be value in future acquisitions. In fact, the current climate is perfect to make purchases that really add value to the company. But other companies with operations to regulate the generation of a number Free cash flow is sometimes were in financial difficulties due to overly ambitious capital structure and profitability within their chosen sector. I am not suggesting Journal Register Company that will be in a position. If so – run, there is no reason to address this danger Journal Register. But it is rare Once prudent to assume a company will be well – managed.

The problem with Journal Register Company is an investment and the risk created by its debt. It's easy exaggerate the risk. The problem is price. The Journal Register Company is not as cheap as it seems. Newspapers are not going the way of the Dodo anytime soon, but they are decline. This decline will not be reversed.

Investors should remember the importance of growth. Newspapers are not growing. No need to search high-multiple stocks simply to gain some short – lived hyper growth. But, there is a need to avoid companies that do not grow their earnings. There are many people trading at higher P / E that the ICC are actually better bargains.

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