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Topic: How To Invest

E-book costs weigh on this Canadian stock pick’s earnings

Indigo Books & Music Inc., Toronto symbol IDG, is Canada’s largest bookseller. The company operates 97 superstores under the Chapters and Indigo banners. It also has 149 mall-based stores, and sells books, movies and music through its web site.

Indigo is one of the Canadian stock picks we analyze in our Successful Investor newsletter.

In its latest fiscal year, which ended April 2, 2011, the Canadian stock pick’s revenue rose 5.0% to $1.0 billion from $968.9 million in the prior year. Even so, earnings fell 67.5%, to $11.3 million, or $0.45 a share, from $34.9 million, or $1.39 a share.

The drop is due to ongoing investments in its 51.4%-owned Kobo electronic-book (e-book) operations. This business sells e-book downloads and the Kobo e-book reading device. Indigo and its partners recently invested an additional $50 million in Kobo; Indigo’s share was $13 million.

E-book demand is growing quickly. Amazon.com (Nasdaq symbol AMZN) recently announced it is now selling more e-books than paper books. Kobo has attracted 3.6 million users from more than 100 countries in just over 15 months.

We’ve updated our buy/sell/hold advice on Indigo in the latest issue of The Successful Investor. You can this issue, along with 5 in-depth Special Reports and much more at no cost when you take a 1-month FREE trial to The Successful Investor today. Click here to get started right away.

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