TEGNA trades at $19.93 per share and has stayed right on track with the overall market, gaining 15.2% over the last six months. At the same time, the S&P 500 has returned 13%.
Is now the time to buy TEGNA, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Do We Think TEGNA Will Underperform?
We're swiping left on TEGNA for now. Here are three reasons we avoid TGNA and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, TEGNA’s sales grew at a weak 1.3% compounded annual growth rate over the last five years. This fell short of our benchmarks.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect TEGNA’s revenue to drop by 1.4%. While this projection is better than its two-year trend, it’s tough to feel optimistic about a company facing demand difficulties.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, TEGNA’s ROIC averaged 3.4 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
TEGNA doesn’t pass our quality test. That said, the stock currently trades at 8.9× forward P/E (or $19.93 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. Let us point you toward one of our top software and edge computing picks.
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