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CTCM Stock: Value Investing Buy Alert?

|Includes:CTC Media, Inc. (CTCM)

CTCM stock: value investing buy alert?

Once In a period I locate real value investing idea, do a little research and put money. But for the first time, it's a Russian company. So this is how I come up with CTCM, which is CTC company. First of all, in short, we are facing with a company which run 3 television channels in Russia. Company headquarter in the U.S.

So what makes it value investing?

First, I would put a "highly danger" on the value investing scale. This is because the company has dividend yield which is so night that makes me think more then a week how to deal with it. But in the and I came up with "buy" conclusion. Here is why:

The company book value per share, based on the last report is 5$ A share. The current price of a share is 8.5$. Which gives us price to book of 1.75. The less the number the best it is.

PE ratio is sensible - 8.87

Let's put is on benjamin graham formula just to make sure of not exceeding 22. So 8.87 multiple by 1.75 gives us 15.5. Hey! Margin of safety is in

Let's move the a core issues which is earning: the company posted EPS of 97 cents for 2013. The question should be- is it good or not? let's connect the dots:

Year EPS Growth
2009 0.64  
2010 0.93 45.31%
2011 0.34 -63.44%
2012 0.59 73.53%
2013 0.97 64.41%
  Average growth 29.95%
Click to enlarge

Other parameter i find useful is Cash flow from Operating activities. Why it's so important? this parameter shows the amount of money the company brings to the shareholders from ongoing (the regular) business. no tricks in it!

Year Cash flow provided by operating activities Growth
2009 132  
2010 185 40.15%
2011 115 -37.84%
2012 157 36.52%
2013 186 18.47%
  Average growth 14.33%
Click to enlarge

If we covered the cash flow data, we must cover the net income data. Let's do it:

Year Net income Growth
2009 100  
2010 145 45.00%
2011 53 -63.45%
2012 93 75.47%
2013 153 64.52%
  Average growth 30.38%
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We can see that the growth in net income is better than Cash flow growth. I'm OK with that, as long as it this way and not the contrary.

The revenue on the other hand growth slower that the net income, that means the company get efficient from year to year:

  Revenues %
2009 506  
2010 601 18.77%
2011 766 27.45%
2012 804 4.96%
2013 832 3.48%
  Average growth 13.67%
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Next issue will be the shareholders equity. This is the safe side of investing. Am i covered or not in case of catastrophic case. I want the shareholders equity to be close or less to market cap. in CTCM it was obvious that it's not the case, since i never come up a company with 8% dividend with no long term debt. Anyway, as noted above, the P/B is 1.5. but does the company succeeded with increase the shareholders safe side? let's check it out:

Year Shareholder Equity Growth
2009 663  
2010 794 19.76%
2011 697 -12.22%
2012 763 9.47%
2013 734 -3.80%
  Average growth 3.30%
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Positive, but not the best result, but i can live with it. i prefer banks with increase of 5-7% on this issue.

what about the dividend you might ask?

Year Dividend paid Growth
2009 No Dividend  
2010 0.51  
2011 0.82 60.78%
2012 0.52 -36.59%
2013 0.63 21.15%
  Average growth 15.12%
Click to enlarge

The conclusion should be this:

Investor pay price, get a value. at the past the price was high. Now the price is sensible. More than sensible.

Disclosure: I am long CTCM.

Stocks: CTCM