JohnCLeven (83.64)

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JW-A's recent selloff may provide a solid value oppurtunity

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December 19, 2012 – Comments (3) | RELATED TICKERS: JW-A

I think this recent 27% selloff in the past few weeks is overdone.

JW-A is a solid publisher w/ a history of wonderful brands including (For Dummies, Frommers (recently sold to google I think), Webster's Dictionary, Cliffnotes, Betty Crocker cookbooks, and a ton of academic and professional journals, textbooks, and *online* training materials.

Over the past decade, Wiley has has steady growth, averaged ROE between 30-40%, averaged ROC between 17-24%. For what it's worth, Morningstar assigns JW-A a wide moat, which according to them, is a rarity among publishing companies.

Here's a snapshot of the companies past decade:

http://financials.morningstar.com/ratios/r.html?t=JW.A&region=USA&culture=en-us

The company is now selling at 7.3x free cash flow, and has 2.5% dividend yield on top of that.

That's just too cheap!

What do you guys think?

3 Comments – Post Your Own

#1) On December 20, 2012 at 3:53 AM, ikkyu2 (99.52) wrote:

I think that the last time I accidentally mentioned to a friend over IM that I would probably be generally interested in reading a few Wiley titles, the pdfs were in my inbox less than 3 seconds later. I didn't even have a chance to think about buying them.

I'm very concerned about that kind of business model. As I said in 1999 (regarding Napster), the cat is not just out of the bag, he is clear over in the next county.

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#2) On December 20, 2012 at 11:16 AM, JohnCLeven (83.64) wrote:

Thanks for the reply!

That's a very good point. You may well be right.

Just to play devil's advocate, the internet, .pdf's, and filesharing are not new. As you said, Napster was 1999. That was about 13 years ago. Over that same legnth of time, Wiley seems to have done reasonably well, especially in the past 3 years.

It would seem that at this depressed price level you're getting most or all of JW.A's future growth for free. Looking at 10 yrs of data, it just seems unlikely to me that this company has peaked forever, and wont deliver any value growth going forward. Even mid single digit growth should bring about a significant increase in share price.

For what it's worth, taking last yrs fcf with 1% growth assumption and a conservative 10% discount rate shows a dcf $65 value. JW.A is now under $38.

Maybe JW.A is more of a "cigar butt" type of play than your typical longterm holding, (The kind i'd actually want to buy in real life), but I think it will turn into a solid CAPs pick.

But please, criticize my picks and ideas as much as you can. That's the best way for me to learn. I've barely scatched the surface of value investing, and I have soooo much to learn.

Thanks!

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#3) On December 21, 2012 at 1:00 PM, JohnCLeven (83.64) wrote: