I am encouraging readers to watch this firm not just because it is in our underlining index for the Claymore/Clear Spin-Off ETF (NYSEARCA:CSD), but rather because it’s a classic result of the research shake out on Wall Street. No one is covering this firm and the lack of volume demonstrates the result.
Before spinning-off from television broadcasting company Gray Television Inc. (NYSE:GTN) on December 30, 2005, communications company Triple Crown Media Inc. (OTC:TCMI) was a newspaper publisher and a wireless service provider. On the date of the spin-off, however, the business was merged with Bull Run Corporation. The acquisition added Bull Run’s Collegiate Marketing and Production Services segment and Association Management Services segment to the company. Currently at a market cap of $40.15 million, the firm has set itself up to become an interesting small cap value stock.
In its newspaper publishing division, the company runs seven newspapers that provide local content and have a combined circulation of about 120,000 per weekday. The collegiate marketing branch provides production and marketing services to certain university athletic events including some on behalf of NCAA in a contract with CBS Sports. In the non-major metropolitan areas of Alabama, Florida, and Georgia, the company provides cellular and personal communications phone service, one-way paging phone service, and equipment through their GrayLink Wireless segment. TCMI also provides management services that encompass conference planning, internet website management, marketing, and other services.
With its highly diversified business model, the company is able achieve a quarterly year over year revenue growth of 149.90%, second highest in its industry. This increase is mainly the result of all of the businesses that make up the company coming together, through the spin-off and merger with Bull Run. Recently TCMI has been structuring each business to give it a focus. In its newspaper publishing business, for instance, the company engaged in a property swap with Community Newspaper Holdings, Inc. (NYSE:CNHI). It gave away a suburban Indiana newspaper in exchange for 3 newspapers in different Georgia suburbs, adding to the four other Georgian newspapers that it owns.
TCMI shows some interesting financial performance given the short amount of time that it has been public. Its one year operating margin of 7.76% is just below the industry average of 11.06%. TCMI also maintains earnings per share [EPS] of 0.96 as compared to its peer group average of 0.54. This is again quite impressive when considering its immense growth. We believe that its performance will only improve with age and the maturity of the company.
In terms of valuation, TCMI has a trailing twelve month price to earnings (P/E) ratio of 7.96 which is substantially below the industry average of 28.97. We believe that this ratio is the result of TCMI’s negative net income as the businesses solidify. Additionally its trading volume is almost non-existent, as evidenced by its three month average daily volume of less than 13,000. However, given its revenue growth, we believe that this spin-off stock is well worth watching and could gain traction in 2007.