LEE - Embedded Expectations Analysis - 2018 07 31
Lee Enterprises, Inc. (LEE:USA) currently trades near historical lows relative to UAFRS-based (Uniform) Earnings with an 8.9x Uniform P/E, implying bearish expectations for the firm. Additionally, management may have concerns about slowing sales in their core business channels, and slowing growth rates within TownNewsSpecifically, management appears concerned that their core business of physical paper circulation faces significant macro headwinds. Physical circulation of newspapers has been trending downward in every year since 2000, and the market size for both weekday and Sunday publications has dropped by over 7 million consumers since 2015, nearly a 25% decrease. This has led LEE to invest in digital-based revenue sources such as their 82.5% stake in TownNews. However, management may have concerns about growth slowing down within that business
Lee Enterprises is a provider of local news and information, and a platform for advertising, in the markets it serves. The company's products provide print and digital editions, and its content and advertising is available through its websites and mobile apps. The company provides marketing services, mainly through its digital marketing agency, Amplified Agency, and through one of its subsidiaries, TownNews, the company provides web hosting and content management services for its media operations and other content producers. The company's also provides commercial printing, distribution of third party publications and management services to other local media operations.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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