NEW YORK ( TheStreet) -- Gannett (GCI - Get Report) did something yesterday that it has been unable to do for more than four-and-a-half years; the stock closed above $20 for the first time since June of 2008. There were no trumpets, no alarm bells, and no fireworks as a result of this feat, but it does appear that investors are once again starting to take notice.
Best known for its newspaper business, and in particular for being the parent of USA Today, it's been a somewhat long road to recovery for Gannett. The company was all but given up for dead in early 2009, as the stock slid below $2. The dividend was slashed 90% from 40 cents to 4 cents, and a level of debt that previously was not much of an issue became problematic as advertising sales went into one of the deepest slumps ever experienced. Trading at $2, the company's market cap was just over $450 million, turning a former large cap arguably of "for widows and orphans" quality into a small-cap name with lots of debt and no prospects in a dying industry.
At least, that's what the market saw. But those who took a look under the hood would have seen a company that was still generating gobs of free-cash flow and attempting to get its financial house in order by selling off some assets, paying down debt, and extending debt maturities. As off the latest quarter end, Gannett had $1.4 billion in net debt, down from $3.7 billion at year-end 2008.
The company has also been resurrecting the dividend, which now stands at 20 cents per quarter. That's half of the pre-crisis dividend, but a long way back from 4 cents. Despite Gannett's run-up above $20, the stock still yields 4%, and there may be sufficient cash flow to further raise the dividend.Even with the stock's 60% run since last June, shares still trade at just 11 times trailing earnings, and just under 9 times 2013 consensus estimates. Incidentally, the consensus has been pretty conservative with the estimates and Gannett seems to routinely beat the consensus, including 6+% upside surprises in the past two quarters. We'll see if Gannett can surprise again when the company reports fourth quarter results on Feb. 4, but I suspect that the Street is staring to become a bit less skeptical.