Shares in Trinity Mirror (LSE: TNI) have risen by around 7% today after it released a trading update. The headline grabber from the release is that Trinity Mirror’s recently launched newspaper, The New Day, will cease circulation tomorrow after just nine weeks of publication. The reason is simply lower than expected circulation and with it not having a website, it appears to have suffered from a general apathy towards physical newspapers in a digital age.
Despite this, Trinity Mirror is on track to meet full-year guidance, although it continues to operate in a very volatile environment. The publisher is forecast to increase its bottom line by 4% this year and by a further 1% next year. While such performance is rather lacklustre, Trinity Mirror’s price-to-earnings (P/E) ratio of just 3.4 indicates that it has an exceptionally wide margin of safety. Therefore, for long-term investors it could prove to be a very profitable buy.
Also reporting today was Sage (LSE: GGE), with the company’s transformation project delivering improved financial performance. Organic revenue increased by over 6%, while recurring revenue growth of 10% was recorded during the first half of the current financial year. Furthermore, Sage experienced a 50% rise in subscription contracts, which shows that its customers are embracing closer relationships. And while the company’s performance in Asia was somewhat disappointing, its diversified business model meant that performance elsewhere helped to offset this.
With Sage forecast to increase its earnings by 7% this year and by 9% next year, it appears to have a bright future. Certainly, it’s a high quality business that seems to have a sound strategy through which to deliver improving financial performance. However, Sage’s valuation appears to offer a narrow margin of safety and prices-in its upbeat growth prospects. For example, it has a price-to-earnings-growth (PEG) ratio of 2.2 and this indicates that there may be better options for investment available elsewhere.
Meanwhile, Millennium & Copthorne Hotels (LSE: MLC) has today released a rather disappointing first quarter trading update. Revenue per available room (RevPAR) fell by 2.6% compared to the same quarter of last year as trading conditions continued to be challenging. Furthermore, Millennium & Copthorne experienced lower occupancy and room rates in most regions, including in key gateway cities such as New York and London.
Looking ahead, the company expects trading conditions to remain volatile and with Millennium & Copthorne trading on a PEG ratio of 3, it seems to offer a relatively unfavourable risk/reward ratio at the present time. Certainly, the strategy it’s following and new management appointments could help to improve its performance, but with a number of other stocks trading on lower valuations and having superior growth prospects, there seem to be better buys elsewhere.
Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.