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Grupo Nacion Stock – Investment Analysis

Common Stock: Grupo Nacion

Current Market Price: $2.50 CRC

Market Capitalization: $4.5 billion CRC ($7.3 million USD)

*All values in this article are expressed in Costa Rican Colones (CRC) unless otherwise noted.

**The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.

Grupo Nacion Stock – Summary of the Company

Grupo Nacion is a Costa Rican daily newspaper company. The have 3 brands; La Nacion, La Teja, and El Financiero, that are sold throughout the country. In addition to their newspaper business they also offer printing services, digital media, and events, all of which generate relevant revenues. Grupo Nacion was founded in 1946 and is headquartered in San Jose, Costa Rica.

Revenue and Cost Analysis

Grupo Nacion had total revenue of $20.5 billion in 2020, a significant decrease from $26.9 billion in 2019. Their COGS in 2020 was $13.8 billion, representing a gross margin of 32%, equal to their gross margin in 2019.

The company is not profitable and had a net loss in both 2020 and 2019. In 2020 Grupo Nacion had a net loss of $2.5 billion.

Balance Sheet Analysis

The company has a sound balance sheet. Their liquidity position is strong in the near term and liability levels are reasonable.

Grupo Nacion Stock – Share Dynamics and Capital Structure

As of year-end 2020 the company has 1.8 billion common shares outstanding.

Dividends

The company paid a dividend of $0.01 cents per share in 2020. This implies a dividend yield of 0.4%.

Grupo Nacion Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$27.7 billion / $41.2 billion = .67

A debt to equity ratio of .67 indicates that Grupo Nacion uses a mix of debt and equity in its capital structure, but is not leveraged, and relies more heavily on equity financing.

Working Capital Ratio

Current Assets/Current Liabilities

$14.7 billion / $6.5 billion = 2.3

A working capital ratio of 2.3 indicates a strong liquidity position. Grupo Nacion should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$2.5 / $22.79 = .11

Grupo Nacion has a book value per share of $22.79. At the current share price, this implies a price to book ratio of .11, meaning the company’s stock trades at a huge discount to the book value of the company.

Grupo Nacion Stock – Summary and Conclusions

Grupo Nacion is in a better position than I expected. Print newspaper is a tough business and I don’t see it getting any easier. That being said, the company is still in decent shape financially, with good liquidity  and reasonable liabilities.

However they are not profitable and long term I would expect their finances to deteriorate. Aggressive investors can consider shorting the stock.

Short sellers can also consider Jamaican real estate company 138 student living.

Disclaimer

This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.

This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.

Patrick Flood, CFA

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