Daily Journal Corp (DJCO): A Hidden Gem in the Publishing Sector?

The stock market often rewards patience and discernment, and few metrics better reflect this principle than the price-to-earnings (P/E) ratio. As of June 2025, Daily Journal Corp (DJCO) trades at a trailing P/E of 5.11, a figure that stands in stark contrast to both its historical averages and the broader publishing industry. This valuation gap presents a compelling case for investors to consider DJCO as a potential undervalued opportunity—provided they weigh the risks alongside the rewards.

A Discounted Valuation: DJCO vs. Peers

DJCO's P/E of 5.11 is nearly 73% below the peer-group average of 18.43 and far out of sync with major competitors like The New York Times Company (NYT) (29.08) and News Corp (NWSA) (32.28). Even within the publishing sector, only E.W. Scripps (SSP) (3.05) trades at a lower multiple. This divergence suggests that the market is pricing DJCO as a value stock with limited growth potential, despite its strong earnings.

The historical data underscores this anomaly. DJCO's P/E has plummeted from a 10-year average of 206.36 to near-record lows today—a stark contrast to its peers, which have largely maintained higher multiples. The current valuation reflects not only reduced investor optimism but also a disconnect between DJCO's robust earnings and its stock price.

Why the Discount?

The math is straightforward: DJCO's stock price of $432.15 (as of June 2025) and trailing EPS of $84.60 yield a P/E of 5.11. This ratio implies investors are paying just $5.11 for every dollar of earnings—a fraction of what they pay for peers. While this could signal undervaluation, several factors contribute to the discount:

1. Industry Dynamics: The publishing sector faces structural headwinds, from declining print ad revenue to shifting reader habits. Competitors like NYT and NWSA have diversified into digital content and subscription models, whereas DJCO's focus on traditional newspaper publishing and specialized financial services may deter growth-oriented investors.
2. Earnings Volatility: Though DJCO's EPS remains strong, its historical P/E swings—from a peak of 1,956.9 in 2016 to a trough of 3.2 in 2021—highlight reliance on irregular gains, such as investments in Berkshire Hathaway. This unpredictability may deter long-term investors.
3. Size and Visibility: With a market cap of $500 million, DJCO is smaller than its peers (e.g., NYT's $8.77 billion). Limited analyst coverage and a lack of visibility in the broader market could suppress its multiple.

Is This a Buying Opportunity?

For value investors, DJCO's P/E offers a rare entry point. At 5.11, it trades well below its 3-year average of 15.19 and even its 2024 year-end P/E of 10.01. The question is whether this discount is justified or represents a pricing error.

• Bull Case: If DJCO's earnings remain stable or grow—despite industry challenges—the P/E could rebound toward historical norms. A mean reversion to, say, 10x EPS would imply a stock price of $846, nearly double its current level.
• Bear Case: If earnings decline due to a weaker economy or further industry contraction, the stock could fall further.

Comparisons to Peers

While DJCO's P/E is low, its fundamentals differ from peers. SSP (3.05) trades at an even lower multiple but faces existential risks (e.g., debt burdens and declining ad revenue). In contrast, DJCO's balance sheet is stronger, and its niche financial services segment provides recurring revenue. Meanwhile, NYT and NWSA's higher multiples reflect growth in digital subscriptions and global content offerings—advantages DJCO lacks.

Investment Takeaway

DJCO's P/E ratio offers a compelling entry point for investors willing to bet on its stable earnings and undervalued status. However, this is not a “set it and forget it” investment. Key considerations:
- Sector Risk: The publishing industry's decline could pressure earnings.
- Management Strategy: Will DJCO pivot to digital or maintain its traditional focus?
- Berkshire Hathaway: The company's investment gains have historically boosted EPS. If those gains dry up, earnings could falter.

For now, DJCO appears to be a contrarian play—a stock that's undervalued but faces clear headwinds. Investors with a long-term horizon and tolerance for volatility could benefit, but due diligence is essential.

In conclusion, DJCO's P/E ratio paints it as a potential bargain in a sector where few such opportunities exist. Yet, as with any value investment, the gap between price and intrinsic worth must be weighed against the risks of a changing industry.

Note: Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.