I've heard the argument that newspaper operators that focus on smaller communities will see relatively less erosion in their business models than their big-city counterparts will. Folks in smaller communities are considered more dependent upon their papers for local news and sports; the goings-on in New York or Washington, D.C., are national news, but that's not the case for Grand Island, Neb., or Sparta, Wis.

If you think this theory has legs, Journal Register (NYSE:JRC) might be a newspaper stock for you. Of course, just because this company might do relatively better, that doesn't mean that it's doing great.

Revenue was down 2% this quarter as sales from circulation and ads both fell by a bit more than 2% on a reported basis. Ad revenue results were a bit spotty, though -- retail and classifieds were rather weak in places like Michigan and Cleveland but much better in areas like New York state. To its credit, management was able to reduce operating expenses by more than 1%, but the end result was still further shrinkage in the operating margin and a 30% decline in adjusted net income.

Rough as times may be, there are still some bright spots here. First, while the company has a pretty significant chunk of debt, it's still generating positive cash flow. In addition, Journal Register's operating focus reduces the importance of national advertising from department stores and auto companies -- something that has tripped up other newspaper operators such as Gannett (NYSE:GCI) and Tribune (NYSE:TRB).

I would say that the two biggest risks at present are continued increases in production costs (like newsprint and ink) and worsening economies in some of the company's regions (like Michigan). Luckily, recent price hikes in the former don't seem to be sticking, and in the latter's case, you can argue that things can't get too much worse, barring a total collapse.

I think that Journal Register is the most attractive newspaper stock around, though admittedly, that's a bit like being Iceland's best sumo wrestler. Lots of otherwise smart investors still seem to see value in newspapers, though. Perhaps this one is worth a look for those who consider themselves value hounds.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).