November 15, 2016
TIME INC NEW COM Fundamental Analysis
Name: TIME INC NEW COM
Symbol: NYSE: TIME
Sector: Consumer Discretionary
Time Inc. is a media company. The company has several well-known publications and provides content marketing, targeted local print and digital advertising programs, branded book publishing, and marketing and support services, including subscription sales services for magazines and other products, retail distribution and marketing services, and customer service and fulfillment services, for the company and third-party clients, including other magazine publishers.
Stock price close on 14th November 2016: $13.70
Market Cap 1.36B
PE Ratio (TTM) -15.15
52 Week Range 12.23 – 17.66
Dividend & Yield 0.76 (5.80%)
We will have a 5 year financial analysis of important fundamental metrics such as revenues, profit margins, net income, earnings per share, cash flow and balance sheet, examining years 2011 to 2015.Starting with revenues first thing we notice is a steady 5 year decline in revenues growth. For each of the last 5 years the company has made less sales compared to previous years. So we have a 5 year negative growth rate for revenues. Current sales growth for year 2015 is -5.43%. What is remarkable is the fact that gross margin shows a stability for the 5 years period, currently at +60.72% having a range of +62.12%/+60.72%. But net margin shows a different story. It has followed the same path as sales, declining for each of the last 5 years ranging from +10.01% during 2011, the highest piece to -28.39% for year 2015, which is the lowest for the 5 year range.
Net income after taxes shows a declining trend for the last 5 years ranging from +368 millions in 2011, the highest point to our range to -881 millions in 2015, the lowest point of reference. Diluted normalized EPS show a steady declining trend for the 5 years period ranging from 3.54 the highest price in the range in 2011, to -1.72 in 2015, the lowest point in the range. Cash flow analysis shows that cash from operating activities remain positive for each of the 5 years, but still showing a declining trend, ranging from 474 millions in 2011,the highest point in our range to 154 millions in year 2015, the lowest point in the range. Free cash flow follows the same trend as operating cash flow, a declining trend from 426 millions in 2011, the highest point in our range to -58 millions for year 2015, the lowest point to the range. And also turned negative from positive.
What we can notice for the 5 years analysis are the following. A decrease of total assets and total equity, an increase of total liabilities and mainly a huge increase in total debt ranging from 34 millions in 2011, the lowest point in our range to 1,293 millions in year 2015, the highest point in the range. Current ratio for year 2015 is 1.26 and quick ratio is 1.23, both above 1 which is considered as a safe ratio but most importantly also both ratios are currently at the highest price for the 5 years range. Debt/Equity ratio has skyrocketed the last 5 years and is currently at 0.7178, the highest point in the time range but still below the price of 1, again considered safe.
Relative value analysis:
Comparing the Net Profit Margin, Return on Equity, Interest Coverage ratios we notice that TIME INC NEW Com has lower ratios than the industry ratios. Price to cash flow ratio is also higher for the company compared to the ratio of the industry. However the company has a higher dividend yield than the dividend yield of the industry.
The company has a current PEG ratio of 2.21 and estimated earnings growth for next 3-5 years of 5%.During last 4 quarters the stock has only one positive earnings surprise and the consensus for earnings in year 2017 has been in decline.
The stock has been recently in a downtrend and current price of $13.70 is blow moving averages of 50 days and 200 days, currently at 13.83 and 14.58 respectively. However the stock has made a recent bounce from low price range of about $12.5 per share, while momentum indicators such as MACD,Stochastics and RSI show bullish momentum and are not at extreme levels.
We strongly believe that unless a radical financial improvement happens our recommendation is to avoid buying the stock. In fact we favor selling the stock at any strong rally as very poor financial performance and a technical analysis that shows the stock is still in downtrend does not give us any strong argument to buy the stock.
Legal disclaimer and sources:
The author has not any current shares of the stock in his portfolio or intends to buy, sell any stocks of the company in the near future. This is an independent financial analysis with not any financial compensation from any source. Sources used are investools.com, zacks.com, stockcharts.com and yahoo finance.