BOSTON ( TheStreet) -- Valassis Communications ( VCI) won a $500 million settlement from Rupert Murdoch's News Corp. ( NWSA) in February while securing a 10-year shared-distribution agreement. The two companies vie for direct-marketing customers, and News Corp. recently succumbed to anti-competitive behavior.Valassis suffered an accumulated loss of $4.37 a share in 2008 as its stock price plummeted 90%. Some analysts chalked it up to the recession or exposure to an "old media" industry. In reality, Valassis, which has a market value of $1.3 billion, was being victimized by its leviathan rival. News Corp. threatened to impose higher prices if its customers did business with Valassis. Valassis generated about $2.2 billion of revenue in 2009, with a majority coming from its shared-mail business. Its newspaper inserts, on-page advertisements, door hangers and coupons might seem antiquated, but they have a track record of success, and unwilling "new media" competitors, who favor online avenues, are quitting the game. Valassis swung to a fourth-quarter profit of $24 million, or 48 cents a share, from a loss of $222 million, or $4.63, a year earlier. Revenue declined 3.4% to $605 million, but profit spreads improved. The company's operating margin widened from 6.3% to 10%. Cash grew 3% to $130 million as debt fell16% to $1 billion. The 2009 turnaround, coupled with a positive conclusion to the News Corp. suit, has buoyed Vallasis shares. The stock delivered a one-year return of 1,900%. Given the recent surge, is it still a sound decision to purchase Valassis? Based on valuation, it is. The stock trades at a price-to-projected-earnings ratio of 11, a 31% discount to the industry average.
Its PEG ratio, a measure of value relative to expected growth, is low at 0.6. (A PEG ratio below 1 implies a cheap stock.) By comparison, the media industry average is 1.1. Furthermore, the stock's 0.6 price-to-sales ratio represents a 70% discount to the industry average. That discount isn't justified based on lower margins. Valassis enjoys a gross spread of 28%. The sell-side remains optimistic about Valassis. Of eight analysts surveyed by Bloomberg, six recommend purchasing shares and the remainder advise holding. The most bullish price target is that of Northcoast Research, which expects the stock to rise 49% and hit $40. Major holders include State Street ( STT) and BlackRock ( BLK). -- Reported by Jake Lynch in Boston.