BOSTON (TheStreet) -- Valassis Communications (VCI) is among the best-performing stocks of the post-recession era. The direct-mailer and free-standing insert printer's stock has surged almost 30-fold since January 2009. It has returned 88% this year.

Valassis, an old-line media company, was an outstanding value pick when pessimism hit its apex in 2009. The junk-mail specialist was easy to dismiss, but its business proved durable amid consumer retrenchment. The stock's upside was catalyzed by anti-competition lawsuit wins against

News Corp.

( NWS.A). Valassis and News Corp. dominate direct marketing, an industry with an obvious growth cap. But it's tough to break into this sort of business. Second-quarter results confirm the bullish prospects.

Profit decreased 30% to $11 million, or 21 cents a share, as revenue gained 6.6%. But the operating margin widened from 8.4% to 10%. Valassis has boosted its cash balance 62% to $229 million since the year-earlier quarter and lessened its debt load by 35% to $710 million. Its quick ratio of 1.3 and debt-to-equity ratio of 1.6 demonstrate marked balance sheet repair. Most important in the quarterly report, management bumped up its 2010 earnings guidance.

A low-end forecast of $2.79 equates to a 2010 earnings multiple of 12. If Valassis hits the high-end of its range, $3.14, then its stock costs just 11 times earnings. Valassis commands a trailing earnings multiple of 4.7, a sales multiple of 0.7 and a cash flow multiple of 3.3 -- 79%, 71% and 80% discounts to media peer averages. Of analysts covering the stock, seven, or 78%, rate it "buy" and two rank it "hold." None rate it "sell." A median target of $43 suggests 25% upside.

Northcoast Research

predicts a gain of 45% to $50.

Raymond James Financial

(RJF) - Get Report

forecasts a rise of 30% to $45.

JPMorgan

(JPM) - Get Report

is "neutral" on Valassis, with a price target of $38.

The stock is 11% below its 52-week high, hit on June 17. All Valassis segments posted gains in the latest period. Shared-mail revenue grew 4%, neighborhood targeted sales increased 18%, free-standing-inserts revenue climbed 2.7% and international, digital-media and services sales advanced 8.9%. As U.S. consumers remain under pressure, Valassis customers are targeting them through coupons. This trend is likely to persist. The unemployment rate is predicted by economists to decline to 9.2% in 2011, a still-elevated level.

Valassis offers exceptionally high return on equity, a measure of profitability for investors. Its tally rose from negative territory to 86% in the latest quarter, exceeding the industry average of 18% and the

S&P 500

average of 12%. Return on assets climbed from negatives to 21%. Given a commitment to balance sheet improvement, strengthening margins and an obvious peer discount, Valassis is still a worthy value stock.

-- Written by Jake Lynch in Boston.

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