The printing industry has taken a big hit over the past 20 years across the board. Newspapers are in the dumps, with many barely surviving. Encyclopedias, atlases, and other staples of American households have gone digital. With the advent of e-readers, now books, magazines, and catalogs are all poised to go down a similar path as reference materials. These factors, combined with its balance sheet and earnings statement, leaves shares of R.R. Donnelley & Sons (RRD) and ideal candidate to short.
The Income Statement
The first item to scrutinize for RRD is the company's income statements of the past few years. After five years of revenue growth, the rapidly contracting economy of late 2008 and 2009 produced a distinct slowdown in sales for the company. In 2010 and 2011, RRD had a small comeback in sales, but never reached the peak of 2008. So far in 2012, the company has produced sales declines of 2% and 4%. Clearly the company has had problems producing growth in the top line.
Looking at the bottom line, there are three quarters that really stand out -- namely the fourth quarters of 2008, 2009, and 2011. Why has the company produced the largest sales amounts in these fourth quarters, yet has produced some outsized losses in three of the last four fourth quarters? The answer lies in restructuring and impairment charges, where the company is rapidly closing plants and shedding workers in order to keep pace with the rapid decline of print media. This leaves the trailing 12 months bottom line at a loss. Nothing on the earnings and revenue front points to a growing, solid company with a case for a higher price per share. The table below highlights the earnings of the last 14 quarters:
| Year-Over-Year Comparisons | ||||
| EPS | EPS previous | % change | ||
