Reading Between Tribune's Lines

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Here's a little something I always like to keep in mind when analyzing and evaluating companies: Is it really worth it? There are literally thousands of investment ideas out there. So how much complexity, aggravation, or disappointment do you really need to put up with? Whenever Foolish buddy Seth Jayson and I talk stocks (which is pretty much every day), we often frame our discussions along the lines of "is it worth the hassle, or could we just go buy 3M instead?"

And now I'm wondering how much hassle Tribune (NYSE: TRB) is worth. I like the cash flow that newspapers can produce. And I like the near-monopoly position they often have in their markets. But I'm not so sure that wading through the earnings reports is really worth the trouble here.

For the company's third quarter, the results were pretty mediocre. Or at least I think they were. Operating revenue was down 1% as unimpressive newspaper ad revenue growth couldn't offset the combination of circulation and broadcasting revenue declines. That continues what has come to be an unfortunate trend of fairly uninspiring top-line growth.

Going below the revenue line, things get murkier. Reported earnings per share were just $0.07 this quarter, but that includes some items related to taxes. If you strip away various items and try to look at an apples-to-apples comparison, I think the company's earnings were down $0.01 from the year-ago level.

Making matters worse, Tribune talks a fair bit about operating cash flow. For example, companywide operating cash flow was up 9%, publishing operating cash flow was up 22%, and so on. Well, the trouble is in how the company has chosen to define operating cash flow. Tribune's idea of it is "operating profit before depreciation and amortization." Now wait, isn't that basically EBITDA? To me, and many other Fools, operating cash flow means net income plus depreciation and amortization, and plus/minus the changes in working capital items like accounts receivable and inventory.

Tribune has certainly taken its share of lumps -- some of them self-inflicted. And I won't deny that the stock looks pretty interesting on a discounted cash flow basis. What's more, the entire industry, from New York Times (NYSE: NYT) to Journal Communications (NYSE: JRN) to Washington Post (NYSE: WPO), seems out of favor, and that can spell opportunity. So, while I may not necessarily love how Tribune reports its performance to investors, there may yet be money to be made here.

For more paperless info on the newspaper industry:

• Gannett's Wrinkled Results
• WSJ Goes on a Diet
• Post Strikes Out

Fool contributor Stephen Simpson owns shares of 3M, which is a Motley Fool Inside Value recommendation.