Any stock market downturn can be a prime opportunity for savvy investors. That's what Money Morning Chief Investment Strategist Keith Fitz-Gerald has been telling readers for over a decade.
The same is often true for individual stocks when they get hammered. Even if the price drop is due to valid concerns, the market can overreact and push the price far below its fair value.
That's the case for our stock to buy today, which has been hit hard this year: It's down 33% over the last 12 months.
But the company's revenue and earnings are on the rebound. And the market hasn't caught on to how much value it left on the table.
That's why it just got a top score from our Money Morning Stock VQScore™ system.
In fact, this pick is the No. 3-rated stock in our whole system.
That's what happens when a company sees its own adversity as an opportunity to streamline operations and focus on new growth opportunities.
Our pick today has done just that. And the board clearly knows that the stock is undervalued: It just launched a $25 million buyback program in March.
It won't be long before the rest of the market catches on. So you'll want to get your shares soon.
After Years in the Wilderness, This Stock Is Entering a New Rapid Growth Phase
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Tribune Publishing Co. (NASDAQ: TPCO) goes back to 1847 with the founding of the Chicago Tribune. Today it serves as an umbrella company over media outlets in seven additional markets, including New York Daily News, The Baltimore Sun, Sun-Sentinel in South Florida, and Hartford Courant.
It's no secret the last decade has been rough on traditional media companies.
Tribune has also suffered from self-inflicted wounds, too. Beginning in 2008, the company entered a four-year bankruptcy that would become the largest ever for an American media company. That was soon after Sam Zell bought a controlling interest. Zell was openly antagonistic toward the company's employees and appointed a CEO with a reputation for dysfunction.
Since then, Tribune Publishing has broken off from its parent company in order to focus on news publishing. As the news business moved to the digital realm, the company rebranded itself "Tronc" (short for "Tribune Online Content). The new name became a frequent target for ridicule by commentators and late-night hosts.
As of last June, after some more restructuring, the company is back to its more trustworthy-sounding name, Tribune Publishing Co. As of January this year, it also has a new CEO.
And after years of shrinking profits, Tribune is projected to increase sales and earnings per share (EPS) over the next two years, according to FactSet.
That's in part because the company has shown dramatic improvement in perhaps its most important metric in the 21st century: digital subscriptions. From an underwhelming 84,000 at the end of 2016, Tribune's digital subscriptions had surged to 250,000 by the last quarter of 2018.
Now it's setting its sights on 1 million subscribers within the next few years.
The two Pulitzer prizes Tribune outlets picked up this year will certainly help with that.
The Sun-Sentinel won for its coverage of the shooting at Stoneman Douglas High School in Parkland, Fla. And the Capital Gazette in Annapolis, Md., won for its coverage of a shooting that occurred in its very own office.
Both events were horrific. But the incident at the Gazette in particular woke many people up to the importance of trustworthy news media today. The staff of the paper was included among Time magazine's "Persons of the Year" for their faithful stewardship in the face of violent opposition.
After years of turbulence, it appears Tribune Publishing is finally getting its due. And as readers jump on board, it's time for investors to do the same.
Now Is the Time to Buy TPCO
In spite of its 2018 fiscal year having one fewer week than the previous year, Tribune Publishing boosted revenue for the first time since it spun off from its parent company.
That reversal appears to be part of a long-term trend upward.
According to FactSet, Tribune's earnings per share is projected to rise in each of the next three years, from $0.55 in 2018 to $1.56 in 2021. That's a 284% increase.
No wonder both analysts tracked by FactSet call TPCO a "Buy," with price targets ranging from 58% to 76% higher than the current price.
That kind of growth - and more - is also suggested by the stock's valuation metrics, too. TPCO's enterprise-value-to-sales ratio comes in at just 32% of the industry average. Its price-to-book ratio is at a 27% discount. Price to cash flow is at 32% discount. And the stock's forward price/earnings ratio is 45% of the average.
That means shares could see a 122% gain in the short term.
And in the long term, you can enjoy Tribune's new era of success and profitability.
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About the Author
Stephen Mack has been writing about economics and finance since 2011. He contributed material for the best-selling books Aftershock and The Aftershock Investor. He lives in Baltimore, Maryland.