BUSINESS
TEGNA Inc. operates as a media company in the United States. The company operates television stations that deliver television programming and digital content. It offers news content to consumers across various platforms, including online, mobile, and social platforms; owns and operates multicast networks under the names True Crime Network, Quest, and Twist that offer on-demand episodes of shows; and operates VAULT Studios, which provides true crime and investigative content in the form of podcasts and original television programs. The company also provides solutions for advertisers through TEGNA Marketing Solutions (TMS). TMS delivers results for advertisers across television and digital platforms, as well as over-the-top (OTT) platforms, including Premion OTT advertising network. As of February 28, 2022, it operated 64 television stations in 51 markets.
INVESTMENT RATING
TGNA’s future returns on capital are forecasted to be above the cost of capital. Accordingly, the company is expected to continue to be an important Value Builder.
TEGNA has a current Value Trend Rating of C (Neutral).
This rating combines very contradictory signals from two proprietary PTR measures of a stock’s attractiveness. TEGNA has a good Appreciation Score of 82 but a poor Power Rating of 19, triggering the Neutral Value Trend Rating.
TEGNA’s stock is selling well below targeted value. The current stock price of $14.14 compares to targeted value 12 months forward of $39.
TEGNA’s high appreciation potential results in an appreciation score of 82 (only 18% of the universe has greater appreciation potential.)
TEGNA has a Power Rating of 19. (This poor Power Rating indicates that TEGNA only has a better chance of achieving attractive investment performance over the near to intermediate term than 19% of companies in the universe.)
Factors contributing to this poor Power Rating include: TEGNA’s earnings estimates have fallen very significantly in recent months; the Television Broadcast Stations comparison group is currently in an unfavorable position; and recent price action has been slightly unfavorable.
INVESTMENT PROFILE
TEGNA’s financial strength is above average. Financial strength rating is 62.
Relative to the S&P 500 Composite, TEGNA Inc has neutral Growth/Value characteristics; its appeal is likely to be to investors heavily oriented toward Income; the perception is that TGNA is normal risk. All factors are relative strengths. TEGNA’s valuation is low: high dividend yield, low P/E ratio, and low price/book ratio. TGNA has unusually low market capitalization.
CURRENT SIGNALS
TEGNA’s current operations are eroding. Return on equity is falling, reflecting: and falling asset utilization.
TEGNA’s current technical position is very weak. The stock price is in a 24.5 month down move. The stock has declined 28.5% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Marginal positive changes in TEGNA Inc (NYSE: TGNA) fundamentals have recently occurred: significant quarterly earnings acceleration occurred.
The stock is currently rated C.
TEGNA Inc (NYSE: TGNA) stock closed at $14.14 on 4/8/24 after a slight decline of -0.5%. However, unusually low trading volume at 56% of normal accompanied the decline. The stock has declined -5.4% during the last week and has been weak relative to the market over the last nine months.
CASH FLOW
In 2023, TEGNA experienced a very significant reduction in cash of -$190.6 million (-35%). Sources of cash were much lower than uses. Cash generated from 2023 EBITDA totaled +$742.3 million. Non-operating sources contributed +$150.7 million (+20% of EBITDA). Cash taxes consumed -$108.1 million (-15% of EBITDA). Withdrawal of investment from the business totaled +$42.7 million (+6% of EBITDA). On a net basis, debt investors received -$174.8 million (-24% of EBITDA) while equity investors removed -$843.6 million (-114% of EBITDA).
TEGNA’s Non-operating Income, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Tegna Peer Group as well. (Since 2020 Non-operating Income, %EBITDA has experienced very sharp improvement.) In most years, TEGNA was in the second quartile and top quartile. Currently, TEGNA is upper quartile at +20% of EBITDA (+$150.7 million).
TEGNA’s Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Tegna Peer Group as well. In most years, TEGNA was in the third quartile and top quartile. Currently, TEGNA is substantially below median at -15% of EBITDA (-$108.1 million).
TEGNA’s Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Tegna Peer Group. (Since 2021 Business Re-investment, %EBITDA has experienced a very sharp recovery.) In most years, TEGNA was in the second quartile and top quartile. Currently, TEGNA is upper quartile at +6% of EBITDA (+$42.7 million).
TEGNA’s Debt Investors, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by a downtrend for the Tegna Peer Group. (Since 2020 Debt Investors, %EBITDA has experienced very sharp improvement.) In most years, TEGNA was in the lower quartile and second quartile. Currently, TEGNA is lower quartile at -24% of EBITDA (-$174.8 million).
TEGNA’s Equity Investors, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Tegna Peer Group. (Since 2020 Equity Investors, %EBITDA has experienced a very sharp decline.) In most years, TEGNA was in the second quartile and lower quartile. Currently, TEGNA is lower quartile at -114% of EBITDA (-$843.6 million).
TEGNA’s Change in Cash, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Tegna Peer Group. In most years, TEGNA was in the third quartile and second quartile. Currently, TEGNA is slightly above median at -26% of EBITDA (-$190.6 million).
TEGNA’s Cash, %Revenue has exhibited a very small overall uptrend over the period. This improvement was accompanied by a similar trend for the Tegna Peer Group. In most years, TEGNA was in the lower quartile and third quartile. Currently, TEGNA is substantially below median at +12%.
PROFITABILITY
TEGNA’s return on equity has eroded very significantly since 2014. The current level of 17.6% is 1.08X the low for the period and is -46.0% from the high.
The key to the story for TGNA is a very small positive trend in pretax operating return significantly offset by a very strong negative trend in non-operating factors.
The productivity of TEGNA’s assets remained stable over the full period 2014-2023: asset turnover has exhibited little to no overall change even as it experienced sharp improvement from the 2019 level.
Additionally, pretax margin has exhibited a volatile overall uptrend but it experienced a very sharp decline after the 2022 high.
Non-operating factors (income taxes and financial leverage) had a significant negative influence on return on equity.
TEGNA’s return on equity is at the upper quartile (17.6%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is upper quartile (8.7%) reflecting asset turnover that is below median (0.42X) and upper quartile pretax margin (20.8%).
Tax “keep” rate (income tax management) is slightly below median (78.6%) resulting in after tax return on assets that is upper quartile.
Financial leverage (leverage) is lower quartile (2.59X).
GROWTH RATES
There are no significant differences between TEGNA’s longer term growth and growth in recent years.
TEGNA’s historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth.
Annual revenue growth has been -1.8% per year.
Total asset growth has been -1.8% per year.
Annual E.P.S. growth has been 0.7% per year.
Equity growth has been 3.5% per year.
TEGNA’s consensus growth rate forecast (average of Wall Street analysts) is 31.0% — substantially above the average of the historical growth measures.
Relative to the Tegna Peer Group, TEGNA’s historical growth measures are erratic. Equity growth (3.5%) has been below median. E.P.S. growth (0.7%) has been at the lower quartile. Revenue growth (-1.8%) has been lower quartile. Total asset growth (-1.8%) has been lower quartile.
Consensus growth forecast (31.0%) is substantially above median.
PRICE HISTORY
Over the full time period, TEGNA’s stock price performance has been variable and significantly below market. Between June, 2013 and April, 2024, TEGNA’s stock price fell -42%; relative to the market, this was a -82% loss. Significant price moves during the period: 1) April, 2020 – February, 2022: +114%; and 2) February, 2017 – May, 2018: -60%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -17.3% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through February, 2024 of -17.3% is lower quartile relative to TEGNA Inc Peer Group.
Current 5-year total return performance of 3.4% is substantially below median relative to the S&P 500 Composite.
Through February, 2024, with substantially below median current 5-year total return of 3.4% relative to S&P 500 Composite, TEGNA’s total return performance is below median relative to TEGNA Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, TGNA’s overall valuation is exceptionally low. All five factors are lower quartile. The highest factor is the ratio of enterprise value/revenue, followed by the ratio of enterprise value/assets, then by the ratio of enterprise value/earnings before interest and taxes, then by the price/equity ratio. The lowest factor is the price/earnings ratio.
Relative to TEGNA Peer Group, TGNA’s overall valuation is quite low. The highest factor, the ratio of enterprise value/revenue, is at median. Ratio of enterprise value/assets is at the lower quartile. Ratio of enterprise value/earnings before interest and taxes is lower quartile. Price/equity ratio is lower quartile. The lowest factor, the price/earnings ratio, is lower quartile.
TEGNA has a large value gap compared to median valuation. For TGNA to fall to lower quartile valuation, its current ratio of enterprise value/revenue would have to decline from the current level of 1.94X to 1.82X. If TGNA’s ratio of enterprise value/revenue were to decline to 1.82X, its stock price would be lower by $-2 to $12.
For TGNA to achieve upper quartile valuation relative to the TEGNA Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 1.94X to 3.95X. If TGNA’s ratio of enterprise value/revenue were to rise to 3.95X, its stock price would increase by $33 from the current level of $14.
VALUE TARGETS
TGNA’s future returns on capital are forecasted to be above the cost of capital. Accordingly, the company is expected to continue to be an important Value Builder.
TEGNA’s current Price Target of $37 represents a +158% change from the current price of $14.14.
This high appreciation potential results in an appreciation score of 82 (only 18% of the universe has greater appreciation potential.)
Notwithstanding this high Appreciation Score of 82, the low Power Rating of 19 results in an Value Trend Rating of C.
TEGNA’s current Price Target is $37 (-14% from the 2023 Target of $42 but +158% from the 04/08/24 price of $14.14). This slight fall in the Target is the result of a +0% increase in the equity base and a -14% decrease in the price/equity multiple. The forecasted decline in growth has a very large negative impact on the price/equity multiple and the forecasted increase in cost of equity has a very slight negative impact as well. Partially offsetting these Drivers, the forecasted increase in return on equity has a slight positive impact.
PTR’s return on equity forecast is 14.0% — in line with our recent forecasts. Forecasted return on equity suffered a dramatic, erratic decline between 2015 and 2023. The current forecast is significantly below the 2018 peak of 27%.
PTR’s growth forecast is 4.0% — below our recent forecasts. Forecasted growth enjoyed a dramatic, variable increase between 2015 and 2023. The current forecast is significantly below the 2022 peak of 14%.
PTR’s cost of equity forecast is 8.0% — in line with recent levels. Forecasted cost of equity erratic but little changed between 2015 and 2023. The current forecast is well below the 2018 peak of 13.5%.
At TEGNA’s current price of $14.14, investors are placing a negative value of $-2 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 9.0% per year, and a return on equity of 13.2% versus a cost of equity of 8.0%.
PTR’s 2025 Price Target of $37 is based on these forecasts and reflects an estimated value of existing assets of $18 and a value of future investments of $19.
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