Better Stock to Buy: Newsmax vs. The New York Times

Key Points

• Newsmax originally skyrocketed in its IPO, though it quickly gave up those gains.

• It's still unprofitable, but delivering solid growth.

• The New York Times has successfully transitioned to a digital-first business model.

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Newsmax (NYSE: NMAX) and The New York Times Company (NYSE: NYT) represent two opposite ends of the political spectrum in the media, and they're also two of the few pure-play news media stocks available for investors.

While some might think of the news media as a dying industry, the response to Newsmax's initial public offering (IPO), which faded soon after, and the success of The New York Times' digital transformation, shows otherwise.

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Let's take a closer at these two stocks to determine which is the better buy today.

Image source: Getty Images.

Business model: Newsmax vs. New York Times

NewsMax is a diversified media company, best known for its Newsmax linear cable channel.

Today, more than 40 million Americans watch, read, and listen to Newsmax. Newsmax has grown over time to become the fourth-largest with 21 million regular viewers.

The company's broadcasting assets include two streaming channels, Newsmax and World at War, and Newsmax2, a free streaming channel. Additionally, Newsmax Radio offers a syndicated radio and several podcasts. Newsmax also has a digital arm that includes online advertising and specialized subscription newsletters, and it has a publishing subsidiary, Humanix Publishing, which has published around 100 titles. Additionally, it owns Medix Health, which sells 22 nutraceutical products, and Crown Atlantic Insurance, an insurance agency that sells annuities, life insurance, and other insurance offerings.

That collection of businesses makes Newsmax different from other media companies. While the vast majority of its revenue comes from cable subscription fees and ad revenue, the company also makes money from selling nutrition and insurance products, as well as books that it can advertise on its programming.

The New York Times may be the best example of a traditional newspaper that transitioned to the digital era. While the transition hasn't always been smooth, the Times now makes the vast majority of its revenue from digital subscriptions and ad revenue, though digital ads have not been as lucrative as print ads.

After selling assets like The Boston Globe, the Times has sought to add complementary news products to the core New York Times newspaper, including sports through The Athletic, games such as Wordle, Cooking, and Wirecutter, a product review site. Overall, the Times continues to set the news agenda in the country, giving it outsize influence over the media landscape, despite the relatively small size of the company, which currently has a market cap of $9.5 billion, even as it trades at an all-time high.

Financials: Newsmax vs. The New York Times

Newsmax is still small. In the second quarter, the company reported $46.4 million in revenue, up 18.4% from the quarter a year ago. Broadcast revenue growth was particularly impressive at 28.5% to $38 million.

However, the company reported a loss on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis of $3.8 million, down from a profit of $1.9 million.

The New York Times also delivered solid growth in the second quarter with revenue up 9.7% to $685.9 million, while total subscribers were up 10% to 11.9 million. Its adjusted operating profit rose from $104.7 million to $133.8 million, giving it an operating profit margin of near 20%. Adjusted earnings per share was up $0.45 to $0.58.

Valuation: Newsmax vs. The New York Times

Newsmax currently has a market cap of $1.15 billion. It is not profitable, and analysts expect it to continue to report a loss at least through 2026. Newsmax currently trades at a price-to-sales ratio of 9.

The New York Times, on the other hand, is solidly profitable and trades at a lower price-to-sales ratio of 3.6. On a price-to-earnings ratio, the stock trades at a multiple of 30. The New York Times also offers a dividend yield of 1.2%.

What's the better buy?

While Newsmax attracted some attention when it went public earlier this year, it's still losing money and is more expensive on a P/S basis than The New York Times.

The Times, meanwhile, is delivering solid revenue growth and strong and expanding profit margins. It's the better buy of the two.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends The New York Times Co. The Motley Fool has a disclosure policy.