Lee Enterprises (NYSE:LEE) has had quite a rough time here lately, and it isn't surprising since it's battling it out in the beleaguered newspaper space. It appears that maybe investors are pleased to see that Lee's fiscal third-quarter results were better than they expected, but whether it's cheap enough remains an issue.

Third-quarter income from continuing operations increased 5% to $22.3 million, or $0.49 per share. However, if you include items from last year (the company's third quarter last year included $0.11 in one-time adjustments such as "transition costs" and "reduction in value of intangibles"), then earnings decreased from last year.

The company's press announcement pointed out it was able to reduce its net debt by $110 million in the first three quarters, as well as generate strong free cash flow. However, Lee's free cash flow generation is decelerating, having decreased 9% to $42.9 million.

Advertising, of course, is a big reason why the newspaper industry is struggling, and Lee didn't have great news in that regard, either. Advertising revenue decreased 3.1%, despite a strong 61.2% increase in online advertising. Lee Enterprises' total revenues from continuing operations decreased 3.2%.

Earlier this year, I took a look at Lee Enterprises. While I can see that the company has some admirable qualities that might help insulate it, such as its focus on local markets, the fact that it was in the midst of a challenged industry made me think the risk wasn't worth the high price tag.

Lee's price has definitely mediated -- its trailing P/E has since dropped to 12 -- but investors are still left to wonder if it's going to have ample growth to justify its price tag. After all, its PEG ratio is still steep at 2.63. A quick peek at the expectations for earnings growth over the next couple of years don't look promising, with either decreasing or just about flat EPS growth anticipated.

Then, look at its competitors. Dow Jones (NYSE:DJ) is in the middle of quite a situation with Rupert Murdoch and News Corp.'s (NYSE:NWS) well-known bid for the newspaper company. And of course, there's the argument that that's better than going it alone. New York Times (NYSE:NYT) has had such a bad time lately that it doesn't even have a trailing P/E ratio at the moment. There may be treats like cash flow and dividend yields in this industry, but looking at the flat or decreasing growth expected for many of these names, it makes sense that investors would be leery. There's a difference between stable, low-risk stocks and the risk of investing in a sharply decelerating industry, after all.

Back in June, Motley Fool Income Investor's James Early removed Lee from the service's list of recommendations for obvious reasons, and judging by its chart, it looks like that was a prudent decision. This is a tough industry all around right now, what with an advertising slowdown and the disruptive influences of news on the Web. I may have asked if Lee was cheap enough several months ago. Given little sign of strong recovery, that's still a legitimate question for investors to ask themselves.

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Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool has a disclosure policy that makes newspapers gray with envy.