It is my strong suspicion that paper is on its way out and that paper-related companies are headed for the, er, dust bin.
Dying companies should exhibit falling revenues and profitability. I also look for companies with large debt as this could be a catalyst for a collapse, especially in a tough credit environment like today. Its important though to look at cash flow also. Some of these companies have large amounts of depreciation. If they don’t need commensurate investments going forward, then net income can make things look worse than they really are.
R.R. Donnelley & Sons (RRD — 27.8)
Provides print and print-related services. Sales have actually risen from $8.4 in 2005 to $11.5 billion in 2007, though income fell in 2007. 90% of the sales growth came from acquisitions (see 10-K) and 2007 profit fell on large non-cash write-offs. Seems acquisition and consolidation is a big part of strategy and yet the 2007 write-off was due to an earlier acquisition.
On the other hand the company is profitable and is forecasting earnings of $3.05-3.18 for 2008.
Standard Register (SR — 11.32)
Falling sales, low profitability and high debt (ref). This looks like a good short candidate.
Deluxe Corp (DX — 16.51)
While profitable, DX has falling revenu and OODLES of debt. One slip up and these guys are toast. They just lowered FY2008 EPS to 2.52-2.62.
Ennis, Inc. (EBF — 16.51)
In addition to its traditional business forms business, the company manufactures…activewear. Says it all for the business forms industry.
