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This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers. The best way to own a deep-value play lately has been to buy a value play -- and wait a week. In the case of Cenveo ( CVO), it actually took several months to complete that metamorphosis. But the bottom line is that this stock is a poster child for what is just not working on Wall Street right now. This commercial printing firm -- and roll-up vehicle for Chairman Robert Burton -- was a raging value by most measures when I entered it back in May of this year. It remains so today. But arguing value in this market is a waste of pixels.
Changing ValuesSo how can I not be pounding the table to get back into this stock now that it is trading for just shy of 0.2 times trailing sales and 1.5 times trailing EBITDA? Because as ridiculous as Cenveo's discount appears, the increasingly dour outlook for the U.S. economy is forcing the realization that it could easily become even more ridiculous. Falling to 0.15 times trailing sales or 1.2 times trailing EBITDA may seem a minor discount from here, but it would represent another 25% loss on this position. And I can't help but notice that even on the couple up days we've had over the past weeks, Cenveo still managed to lose a percent or two. The stock is simply way out of favor, and the rational safety net of a compelling valuation just does not seem enough to spur the demand for Cenveo that I originally expected. This is not wholly irrational. I have already conceded that the sexy roll-up activity that generated spikes in Cenveo's stock as late as last year is not likely to resume anytime soon. It is also safe to assume that a slowing U.S. economy will cause headwinds to revenue growth in the coming year. Even so, the low (and decreasing) valuation of these shares still seems overdone to me, and it is with consternation that I find myself shying away from this (still) seemingly attractive value play.
This article was written by Jonathan Moreland, whose newsletter, "TheStreet.com InsiderInsights," parses mounds of data on insider trades to find investable ideas.