Investors who think the prospects of a dismal holiday retail advertising season are reason enough to avoid the New York Times Co. ( NYT) are underestimating the Old Gray Lady's true negatives.

Not only is the economic malaise almost certain to mute ad volume in the near term, but the decline merely punctuates a trend in newspaper display advertising that has been flat for years. The same goes for circulation. It's happening at NYT's flagship New York Times as well as the firm's subsidiaries, which include the Boston Globe and a handful of regional papers.

In addition to a management team that seems relatively slow in coming to terms with the impact of the digital age on the business of news delivery, tenacious media titan Rupert Murdoch is said to be eyeballing the Times' general readership market as ripe for penetration by an expanded Wall Street Journal, which is now part of his News Corp. ( NWS) empire.

Although freedom of the press protects the content of the New York Times Co. newspapers, the democratic concept of "equal representation" is not enjoyed by bulk of the firm's shareholders. The family trust of Times founder Adolph Ochs holds 88% of a special "class B" issue of common stock that gives the group the right to elect 70% of the firm's board of directors and direct the outcome of the firm's most crucial business matters.

Other media companies have been structured with dual classes of common stocks structured in ways that allow minority holders from the family of the founders to maintain management control. Criticisms have been made that such structures engender management control by wealthy heirs who place high values on their status as keepers of traditional standards and practices in the journalism world. In such cases, it has been argued, short shrift can be given to moves that would optimize the value held by the owners of the other classes of shares.

NYT has helped maintain the lifestyles of the Ochs heirs by issuing regular dividend payments even while the value of its shares tanked. In fiscal 2006, when the firm suffered a loss of more than half a billion dollars, it raised its annual dividend per share from 65 cents to 69 cents, a payout level that depleted the firm's coffers by more than $100 million. Then, in 2008, when it climbed back to profitability, it raised its dividend an additional 25.4% to 86.5 cents a share. It ended up paying out 60% of its net income of $208.7 million in the form of dividends that year.

The firm's shares, which peaked at $53 in June 2002, have been fluctuating steadily lower over the past six years. Lately they have been in the $12 to $15 range. As can be seen in the accompanying table, NYT's lackluster performance earns it a grade of D+ from TheStreet.com Ratings, which equates with a "sell" recommendation.

The table below shows that an investor paying 17.1 times this year's estimated earnings of 76 cents a share -- down from $1.45 in 2007 -- is getting shares worth 18.8 times next year's consensus estimate of an even more depressed 69 cents.

The question any investor tempted to buy NYT should ask is: Why would anyone want to do that?

ALL THE NEWS NOT GOOD FOR NEW YORK TIMES CO.
Company NEW YORK TIMES CO
Ticker NYT
Economic Sector Consumer Discretionary
Industry Media
Mkt Cap ($Mil.) 1,903.8
Reward Grade C
Risk Grade D+
Overall Grade D+
Recommendation Sell
Recent Price 13
Current Yr. EPS 0.76
Next Yr. EPS 0.69
P/B 2.1
P/S 0.61
P/E (Curr. Yr.) 17.1x
P/E (Next Yr.) 18.8x
Employees 10,231
2007 Ann'l Results ($Mil.):
Total Revenue 3,195.1
Operating Inc. 227.4
Net Income 208.7
Total Assets 3,473.1
Total Current Assets 664.5
Total Current Liabilities 975.7
Total Liabilities 2,494.9
Total Equity 978.2
Source: TheStreet.com Ratings

For an explanation of our ratings, click here.
Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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