The publishing industry, which provides multifaceted information to people worldwide, is well-placed to remain buoyed in the upcoming months, thanks to content digitization and rapid technological advancements.
Given this backdrop, let us explore publishing stocks MultiChoice Group Limited (MCHOY) and Lee Enterprises, Incorporated (LEE), which could be wise portfolio additions now. In contrast, BuzzFeed, Inc. (BZFD) could be avoided for the reasons mentioned in the article.
But before we get into the fundamentals of the stocks mentioned above, let us briefly discuss the publishing industry.
The publishing industry involves the production and marketing of information, including books, and can be found in newspapers, magazines, cards of various types, music, and directorial software.
It possesses immense relevance in keeping the readers entertained with useful information. Moreover, some evolving trends could help the industry thrive in the foreseeable future.
The increased demand for digital services has empowered the industry to find new and creative ways to engage audiences and improve operations. Most consumers are consuming information from social media and mobile applications. Hence, publishers are committed to greater use of AI and machine learning in the publishing process.
Digital publications, which garnered prominence in recent times, are embracing AI to boost performance and efficiency and simultaneously considering its impact on the editorial side of the business. The global digital market is poised to grow to $367.19 billion by 2030, rising at a CAGR of 9.7% between 2023 and 2030.
Moreover, the Association of American Publishers (AAP) recently released its StatShot report for March 2023, which reflected that revenue for the overall publishing industry was up 3.2% year-over-year to $3.2 billion for the quarter that ended March 2023.
Given the industrial tailwinds, notable publishing stocks MCHOY and LEE, with solid fundamentals, could be worthy investments now.
However, like most industries, the publishing industry is not completely insulated from macroeconomic headwinds such as sky-high prices and all-time high-interest rates. Moreover, consumers are cutting back on their spending amid inflation, which could affect the industry.
Therefore, fundamentally bleak stock BZFD could be best avoided now.
Stocks to Buy:
MultiChoice Group Limited (MCHOY)
Headquartered in Randburg, South Africa, MCHOY operates video-entertainment subscriber platforms in South Africa, the rest of Africa, Europe, and internationally. It operates through South Africa; Rest of Africa; and Technology segments.
MCHOY’s trailing-12-month EBIT and levered FCF margins of 18.68% and 37.53% are 121.6% and 410.7% higher than the industry averages of 8.43% and 7.35%, respectively. Its trailing-12-month ROTC of 25.20% is 570.3% higher than the 3.76% industry average.
MCHOY’s forward EV/Sales of 0.86x is 52.3% lower than the industry average of 1.80x. Its forward EV/EBIT and EV/EBITDA multiples of 4.73 and 3.77 are 68.8% and 54.7% lower than the industry averages of 15.13 and 8.33, respectively.
MCHOY paid a 565 SA cents per listed ordinary share dividend for the fiscal year 2022 on September 9. Its annual dividend translates to a yield of 6.47% at the current price level, while its four-year average dividend yield is 3.26%.
MCHOY’s revenues increased 6.6% year-over-year to ZAR28.65 billion ($1.47 billion) during the half year (ended September 30, 2022). The company’s operating profit increased 6.2% year-over-year to ZAR6.22 billion ($318.19 million). Its total comprehensive income for the period rose 38.6% year-over-year to ZAR3.15 billion ($169.94 million).
Analysts expect MCHOY’s revenue for the fiscal year ending March 2024 to grow 1.1% year-over-year to $3.19 billion. The stock gained 3% intraday to close the last trading session at $5.10.
MCHOY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MCHOY has an A grade for Value and a B for Stability. It is ranked #2 within the B-rated 9-stock Entertainment – Publishing industry.
Beyond what we have highlighted above, one can access additional ratings for MCHOY’s Growth, Sentiment, Quality, and Momentum here.
Lee Enterprises, Incorporated (LEE)
LEE provides local news and information and advertising services in the United States. The company offers print and digital editions of daily, weekly, and monthly newspapers, niche publications, and web hosting and content management services.
LEE’s trailing-12-month asset turnover ratio of 0.97x is 97.5% higher than the 0.49x industry average. Its trailing-12-month gross profit margin of 57.65% is 16.2% higher than the 49.59% industry average.
LEE’s forward non-GAAP P/E of 6.01x is 57.4% lower than the industry average of 14.12x. Its forward EV/EBIT multiple of 6.13 is 26.5% lower than the industry average of 8.33.
During the fiscal second quarter that ended March 26, 2023, LEE’s total digital revenue increased 11.8% year-over-year to $65 million. For the same quarter, its total operating revenue stood at $170.69 million. Its adjusted EBITDA stood at $14.32 million.
Its cash and cash equivalents came in at $19.03 million for the six months that ended March 26, 2023, compared to $15.34 million for the six months that ended March 27, 2022.
For the fiscal year 2023, the company expects its total digital revenue to come between $270 million and $285 million, while its adjusted EBITDA is projected to be between $94 million and $100 million.
LEE’s revenue and EPS are expected to come in at $174.04 million and $0.93, respectively, for the fiscal third quarter ending June 2023.
Shares of LEE have gained 8.2% over the past month to close the last trading session at $13.52.
LEE’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Stability, Value, Quality, and Sentiment. Within the same industry, it is ranked first.
Click here to see LEE’s additional ratings for Growth and Momentum.
Stock to Sell:
BuzzFeed, Inc. (BZFD)
BZFD is a digital media company that distributes content across owned and operated, as well as third-party platforms.
BZFD’s trailing-12-month Capex/Sales of 0.84% is 79.1% lower than the 4.01% industry average. Its trailing-12-month ROCE, ROTC, and ROTA of negative 79.17%, 7.08%, and 40.93 compare to the industry averages of 3.29%, 3.76%, and 1.43%, respectively.
BZFD’s revenue decreased 26.7% year-over-year to $67.15 million in the fiscal first quarter that ended March 31, 2023. Net loss attributable to BZFD and net loss per common share came in at $36 million and $0.26, respectively. Its adjusted EBITDA decreased 20.4% year-over-year to negative $20.19 million.
Moreover, its cash and cash equivalents declined 33% year-over-year to $49.95 million.
For the fiscal second quarter ending June 2023, analysts expect BZFD’s revenue to decline 26.7% year-over-year to $78.27 million. Its EPS is expected to come in at negative $0.13 for the same quarter. It failed to surpass EPS estimates in three of the trailing four quarters, which is disappointing.
The stock has declined 68.2% over the past year to close the last trading session at $0.66. Over the past six months, it lost 36.4%.
BZFD’s weak prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system.
BZFD has an F grade for Stability and a D for Momentum and Quality. It is ranked last within the same industry.
To see the additional BZFD POWR Ratings (Growth, Value, and Sentiment), click here.
What To Do Next?
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MCHOY shares were trading at $5.10 per share on Monday morning, up $0.15 (+3.03%). Year-to-date, MCHOY has declined -25.00%, versus a 13.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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