When it comes to finding new investment opportunities, the education sector may not be top of mind. But if you can reserve judgment for a few minutes, an education stock with as much as 53.5% upside may be worth your consideration.
We applied a discounted cash flow analysis to John Wiley & Sons and discovered that this 200-year old education company has a lot going for it beyond its financials.
Understanding the Business Model of John Wiley & Sons
John Wiley & Sons, Inc., commonly known as Wiley, was founded in 1807 by Charles Wiley in New York City. Today, the multi-billion dollar company is headquartered in Hoboken, New Jersey, and is centered around academic publishing and instructional materials. Essentially, the company sells books, journals, and encyclopedias both in print and electronically.
During the Wiley Q3 2022 Earnings Call, Brian Napack, the President and CEO of the company, discussed the long history of John Wiley & Sons while also providing details of the company’s upcoming goals.
Napack told shareholders: “This year marks Wiley’s 215th anniversary. That’s 215 years of unlocking human potential by advancing research and education, which we have proudly done through good times and bad, through the industrial revolution, the digital revolution, globalization, and numerous periods of disruption, including recently two global pandemics.”
The CEO went on to say, “At Wiley’s core, we’re in the knowledge business, the creation, the dissemination, and the application of new information and new knowledge. We do our work through scientific research and career-connected education. And in a world where new information is being created faster than ever, where new discoveries, insights, and innovations are the essential lifeblood of every career and every industry, knowledge is a pretty good business to be in.“
Napack went on to highlight the three main offerings of Wiley as a leader in the knowledge industry, which include:
- Enabling discovery through scientific research
- Powering career-connected education for learners
- Shaping the workforce for employers
Wiley’s two main strategies when it comes to elevating and driving the knowledge economy include:
- Leading the industry’s transition to open research through Wiley’s research publishing and solutions
- Bridging the widening talent gap with career-connected education products and education services
Wiley’s main goal at this time is to ensure that the massive global investment in education delivers a meaningful ROI for society in the form of career advancement and corporate strategy success.
Is John Wiley & Sons an Undervalued Stock?
During the Q3 2022 Earnings Call, the CEO of Wiley also discussed the positive financial aspects of the company.
He relayed this message to shareholders, “Despite the significant transitions in our sector in a very unusual two-year period, we’re expecting to generate over $400 million in EBITDA and over $200 million in cash flow this fiscal year while surpassing the $2 billion mark in revenue for the first time ever.“
Napack went on to say, “All this shows that after 215 years, Wiley is foundationally strong and performing well. And we believe that our hard work and investment in innovation is setting us up for continued profitable success in the long term.”
When we ran a discounted cash flow forecast on Wiley, we arrived at a fair market value of $77.09 per share, which represented an upside potential of 53.5% at the time of research.
Is John Wiley & Sons a Buy, Sell, or Hold?
All things considered, Wiley looks like a good buy right now. On a valuation basis, it has tremendous upside potential with a generous margin of safety. And with the stock currently trading near its 52-week low, the price is a relative bargain.
Don’t expect a whole lot in terms of top line growth, which is forecast to rise slowly in the coming years:
- 2023: $2.16 billion
- 2024: $2.25 billion
- 2025: $2.34 billion
- 2026: $2.41 billion
Modest top line growth should not be the focus, however. This isn’t a high-flying growth company. It’s a relatively safe bet in a tough economic climate that offers a 2.75% yield and has a 23 year streak of paying dividends.
With over 200 years in the business, John Wiley & Sons has proven itself as a staple in the industry and shown that the company has true staying power. If you have space for it in your portfolio Wiley is a buy and hold for years to come.