Over the past six months, TEGNA’s shares (currently trading at $16.70) have posted a disappointing 8.3% loss, well below the S&P 500’s 5.4% gain. This might have investors contemplating their next move.
Is there a buying opportunity in TEGNA, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think TEGNA Will Underperform?
Despite the more favorable entry price, we're cautious about TEGNA. Here are three reasons why there are better opportunities than TGNA and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, TEGNA’s sales grew at a sluggish 4.5% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect TEGNA’s revenue to drop by 9.6%, a decrease from its 4.5% annualized growth for the past five years. This projection doesn't excite us and indicates its products and services will face some demand challenges.
3. Cash Flow Margin Set to Decline
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Over the next year, analysts predict TEGNA’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 19.3% for the last 12 months will decrease to 12.8%.
Final Judgment
TEGNA falls short of our quality standards. Following the recent decline, the stock trades at 8× forward P/E (or $16.70 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of TEGNA
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