John Wiley & Sons Inc (WLY, Financial) has experienced a daily gain of 3.71% and a 3-month loss of -7.08%. With an Earnings Per Share (EPS) (EPS) of 0.29, the question arises: is the stock modestly undervalued? This article presents a detailed valuation analysis of John Wiley & Sons (WLY), encouraging readers to delve into the subsequent analysis.
Company Introduction
John Wiley & Sons Inc is a leading global provider of academic journals, books, pre- and post-hire assessments and training, test preparation materials, and online education program management solutions. The company has reorganized its Education lines of business into two new customer-centric segments. The Academic segment addresses the university customer group and includes Academic Publishing and University Services. The Talent segment addresses the corporate customer group and is focused on delivering training, sourcing, and upskilling solutions. With a stock price of $36.3 and a GF Value of $47.53, the company appears to be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GF Value, John Wiley & Sons (WLY, Financial) appears to be modestly undervalued. With a market cap of $2 billion, the stock's current price of $36.3 per share is below its estimated fair value. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Assessing the financial strength of a company is crucial before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. John Wiley & Sons has a cash-to-debt ratio of 0.12, which is worse than 83.27% of 1004 companies in the Media - Diversified industry. The overall financial strength of John Wiley & Sons is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. John Wiley & Sons has been profitable 9 over the past 10 years, with a revenue of $2 billion and an EPS of $0.29 over the past twelve months. Its operating margin of 10.15% ranks better than 73.21% of 1019 companies in the Media - Diversified industry. Overall, GuruFocus ranks the profitability of John Wiley & Sons at 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of John Wiley & Sons is 3.2%, ranking better than 60.23% of 958 companies in the Media - Diversified industry. The 3-year average EBITDA growth rate is 27.4%, ranking better than 76.85% of 769 companies in the Media - Diversified industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can also determine its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, the company is creating value for shareholders. For the past 12 months, John Wiley & Sons's ROIC is 3.32, and its WACC is 9.01.
Conclusion
In conclusion, the stock of John Wiley & Sons (WLY, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 76.85% of 769 companies in the Media - Diversified industry. To learn more about John Wiley & Sons stock, you can check out its 30-Year Financials here.
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