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With A -75.00% Earnings Drop, Is The New York Times Company’s (NYSE:NYT) A Concern?

After looking at The New York Times Company’s (NYSE:NYT) latest earnings update (01 April 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for New York Times

Despite a decline, did NYT underperform the long-term trend and the industry?

NYT’s trailing twelve-month earnings (from 01 April 2018) of US$13.46m has more than halved from US$31.34m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -13.80%, indicating the rate at which NYT is growing has slowed down. Why is this? Well, let’s look at what’s transpiring with margins and whether the whole industry is experiencing the hit as well.

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Although revenue growth over the last couple of years, has been negative, earnings growth has been falling by even more, suggesting that New York Times has been increasing its expenses. This hurts margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US media industry has been growing its average earnings by double-digit 26.87% over the prior year, and a less exciting 6.43% over the previous five years. This suggests that any uplift the industry is benefiting from, New York Times has not been able to gain as much as its average peer.

NYSE:NYT Income Statement June 24th 18
NYSE:NYT Income Statement June 24th 18

In terms of returns from investment, New York Times has not invested its equity funds well, leading to a 1.68% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.56% is below the US Media industry of 6.68%, indicating New York Times’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for New York Times’s debt level, has increased over the past 3 years from 4.34% to 12.39%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 107.80% to 26.21% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. In some cases, companies that endure an extended period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. You should continue to research New York Times to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for NYT’s future growth? Take a look at our free research report of analyst consensus for NYT’s outlook.

  2. Financial Health: Is NYT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 01 April 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.