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Courier: Books and Bibles

06/25/2014 8:00 am EST


John Dobosz

Editor, Forbes Premium Income Report and Forbes Dividend Investor

John Dobosz returns to a stock that had a “monster run” last year, and has since “melted down.” Here, the editor of Forbes Dividend Investor explains why now may be a good to buy again.

Back in December 2012, I recommended Courier Corp. (CRRC) at $11.59 per share because it offered an extraordinarily high dividend yield and traded at substantial discounts to historical multiples of sales, earnings, and book value.

It was no value trap. The stock went on a monster run, gaining 65% in price to a high of $19.16 in November 2013. Since that high more than six months ago, Courier slowly melted down, tumbling 35% to a 52-week closing low of $12.40 last week.

Dropping below $17 triggered our 10% trailing stop loss and got us out before the major bloodshed.

Now that Courier has given up most of its gains since December 2012, the stock is looking cheap again with a yield of 6.5%, plus the CEO recently bought shares. If you don't already own Courier, now appears to be a good time to buy.

Founded in 1824, the North Chelmsford, Massachusetts company is the third largest book manufacturer in the United States, providing prepress, production, warehousing, and distribution services.

Courier's business is split into three primary parts. Educational text books account for about 41% of revenue, trade titles another 31%, and religious publishing—including Gideon's Bibles—represent about 28% of sales.

By sticking to textbooks, Bibles, and sheet music—where paper is still the preferred medium—Courier has been able to keep sales steady over the past several years. From 2011 through the end of 2013, revenue grew from $259 million to $275 million.

For the first six months of the current fiscal year, which ends September 30, sales were up 6% to $134.2 million. Due to non-cash goodwill amortization charges, earnings over the past 12 months of $0.69 per share are well below operating cash flow per share of $2.67 over the same period.

Cash flow comfortably covers the $0.84 in annual dividends, paid quarterly. Courier has kicked out dividends every three months since March 1990 and the payout has never decreased.

If Courier were to trade at its three-year average price-sales multiple of 0.59, the share price would be $14.60. As a multiple enterprise value-to-EBITDA, Courier trades at a fat 26.7% discount, implying a $17.50 stock price.

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