Tuesday, March 14, 2006

Gannett Corp Undervalued at $61.26; March 14, 2006

Market Cap (intraday): 14.59B
Trailing P/E (ttm, intraday): 12.13
Forward P/E (fye 25-Dec-07) 1: 11.45
Price/Sales (ttm): 1.92
Price/Book (mrq): 1.93
Enterprise Value/Revenue (ttm)3: 2.62
Enterprise Value/EBITDA (ttm)3: 8.556
Return on Assets (ttm): 8.22%
Return on Equity (ttm): 15.40%
Profit Margin (ttm): 16.38%

Source: http://finance.yahoo.com/q/ks?s=GCI

Enterprise Value
= Market Cap + Total liabilities (excluding net payables) – Cash
= $14.6B + $7.3B – $0.16B
= $21.74B

Free Cash Flow
= Net operating Cash Flow – Capital Expenditure
= $1.43B - $0.263B
= $1.167B

Enterprise Value / Free Cash Flow
= $21.74B / $1.167B
= 18.62

March 14, 2006
McClatchy's purchase of Knight Ridder for $4.5 billion.

Knight Ridder’s:

Enterprise Value (based on purchase price) (March 14, 2006)
= $4.5B + $2.9B - $0.04B
= $7.36B

Year FCF
TTM $0.25B
2004 $0.34B
2003 $0.37B
2002 $0.35B
2001 $0.39B
2000 $0.31B

Normalised FCF = $0.335B

EV / FCF (Normalised)
= $7.36B / $0.335B
= 22

Based on Knight Ridder’s purchase, if Gannett is valued at 22X of EV/FCF, then Gannett could potentially worth 27% more than current market price.

This is not meant as a full, detailed analysis of Gannett, but a simple and quick calculation.

All the best,
Dah Hui Lau (David)

To visit my archive: http://dahhuilaudavid.blogspot.com/2005/11/archive-of-dah-hui-laus-blog.html

1 comment:

Gaurav Goel said...

Hey David!
I was just analysing this stock and I found that many insiders have been selling this stock. Even though most insiders are buying it, I am a little skeptical about the selling part.
Also the return on equity has now dropped to about 14%, which is very good but still a little below what many value investors feel comfortable in.
Overall this stock is looks good, but I wouldn't call it a mouth watering stock. You can reply back to me on grv.goel@gmail.com