Gatehouse Heading For The Doghouse?

Excerpt from our One Page Barron's Summary (receive it weekly by email by signing up here):

Scoop! Frothy News Shares by Andrew Bary

Highlighted companies: GateHouse Media Inc. (GHS) , Gannett Co. Inc. (GCI), The New York Times Co. (NYT), Tribune Co. (TRB), Dow Jones & Company Inc. (DJ), Yahoo! Inc. (YHOO), Google Inc. (GOOG), Lee Enterprises Inc. (LEE)
Summary: While other newspaper stocks head south, Gatehouse Media (GHS), an operator of small newspapers around the country entices investors with a high (6%) yield, double the payout of other big newspaper operators such as Gannett (GCI), New York Times (NYT), Tribune (TRB) and Dow Jones (DJ), pushing GHS shares up to $20.50 from an IPO price of $18. But Gatehouse's payout is misleading. GHS's P/E ratio is very high (37) compared to the rest of the industry (12-15), and its main appeal could be undermined if, say, Gannett decides to lift its dividend. With a market value of $800 million and net debt of $500 million, the highly leveraged publisher could have an even harder time dealing with the industry's twin woes of advertising and plummeting circulation. GHS's "hyperlocal" strategy of focusing on small town newspapers to avoid competing with the big national advertisers may be in jeopardy, as Yahoo! (YHOO) and Google (GOOG) start moving in on local markets. Analyst John Janedis of Wachovia gives GHS a mere 'Market Perform,' despite Fortress Investment's (who bought GHS a year ago for $10 a share) good record of taking companies public. Barron's Bottom Line: For those partial to small and mid-sized papers, Gannett and Lee Enterprises look like much better bets.
Related: A Newspaper IPO?! Gatehouse Media Bucks the Trend