John Wiley & Sons Inc Valuation – August 2018 $JW.A

Company Profile (excerpt from Reuters): John Wiley & Sons, Inc., incorporated on January 15, 1904, provides knowledge and knowledge-enabled services in the areas of research, professional practice and education. The Company operates through three segments: Research, Professional Development and Education. Through the Research segment, the Company provides digital and print scientific, technical, medical and scholarly journals, reference works, books, database services and advertising. The Professional Development segment provides digital and print books, corporate learning solutions, employment talent solutions and training services, and test prep and certification. In the Education segment, the Company provides print and digital content, and education solutions, including online program management services for higher education institutions and course management tools for instructors and students. The Company is engaged in developing and cross-marketing products to its customer base of researchers, professionals, students and educators. The Company’s operations are located in the United States, Canada, Europe, Asia and Australia.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of JW.A – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,667,866,266 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.55 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -3.00% Fail
6. Moderate PEmg Ratio PEmg < 20 22.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.08 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.55 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.91 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.85
MG Growth Estimate 0.09%
MG Value $24.76
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $41.38
MG Value based on 0% Growth $24.26
Market Implied Growth Rate 6.76%
Current Price $62.85
% of Intrinsic Value 253.82%

JOHN WILEY & SONS -CL A Common Stock does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.84 in 2015 to an estimated $2.85 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.76% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into JOHN WILEY & SONS -CL A Common Stock revealed the company was trading above its Graham Number of $38.34. The company pays a dividend of $1.28 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 22.02, which was above the industry average of 15.27. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-20.04.

JOHN WILEY & SONS -CL A Common Stock scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$20.04
Graham Number $38.34
PEmg 22.02
Current Ratio 0.55
PB Ratio 3.08
Current Dividend $1.28
Dividend Yield 2.04%
Number of Consecutive Years of Dividend Growth 19

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Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $479,971,000
Total Current Liabilities $874,311,000
Long-Term Debt $360,000,000
Total Assets $2,839,451,000
Intangible Assets $1,867,872,000
Total Liabilities $1,648,894,000
Shares Outstanding (Diluted Average) 58,344,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.15
Apr2018 $3.32
Apr2017 $1.95
Apr2016 $2.48
Apr2015 $2.97
Apr2014 $2.70
Apr2013 $2.39
Apr2012 $3.47
Apr2011 $2.80
Apr2010 $2.41
Apr2009 $2.15
Apr2008 $2.49
Apr2007 $1.71
Apr2006 $1.85
Apr2005 $1.35
Apr2004 $1.41
Apr2003 $1.38
Apr2002 $0.91
Apr2001 $0.93
Apr2000 $0.81
Apr1999 $0.60

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.85
Apr2018 $2.70
Apr2017 $2.42
Apr2016 $2.71
Apr2015 $2.84
Apr2014 $2.77
Apr2013 $2.75
Apr2012 $2.84
Apr2011 $2.45
Apr2010 $2.23
Apr2009 $2.06
Apr2008 $1.93
Apr2007 $1.61
Apr2006 $1.50
Apr2005 $1.29
Apr2004 $1.20
Apr2003 $1.04

Recommended Reading:

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John Wiley & Sons Inc Valuation – Initial Coverage $JW.A

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.


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