The Top 3 Major Book Publishing Stocks Today

The book publishing industry is undergoing rapid changes: The business model that remained relatively unchanged for decades is moving towards new technologies such as e-books rapidly.

Not only is the nature of the products is changing, but distribution channels are also shifting: Traditional book stores are increasingly closing down, whereas sales of books via e-commerce platforms are growing. Amazon, which started out as an online book store and expanded into many other product categories since, is the biggest online book seller. Amazon is not only selling books; the company has also moved into publishing books itself – for Amazon this is a relatively small business, but it infringes on the traditional business of publishers like Random House.

Despite these factors the publishing industry is not troubled beyond relief. There are still several positives: NPD reports that physical book sales rose by 1.9% during 2017, so even in this segment there is some growth that publishers can benefit from. The global book publishing market is also forecasted to continue to grow over the next couple of years, supposedly hitting $123 billion by 2020.

In this article we will look at the three biggest publicly traded book publishing companies: Scholastic (SCHL), John Wiley & Sons (JW.A), and Pearson plc (PSO), the parent company of Random House.

They are ranked by estimated total returns over the coming five years in this article, and more data on each company is available through the Sure Analysis research database.

Book Publishing Stock #3: Scholastic (SCHL)

Scholastic is the smallest company among the three we will look at in this article; its market capitalization is $1.5 billion. Scholastic, which publishes children’s books, teaching material and magazines, was founded in 1920 and is headquartered in New York, NY.

Scholastic has been able to grow its revenues at a low-single digits pace in recent quarters (sales were up by 3% in the last reported quarter), but Scholastic was not profitable during all of these quarters. Due to the high amount of children book sales (which make up ~60% of the company’s revenues) total revenues are relatively seasonal throughout the year, depending on holidays in the quarter, and they are also impacted by the timing of new book releases from its most attractive series. During the most recent quarter Scholastic had to report a small net loss ($0.30 per share), but the company is nevertheless forecasting relatively solid profitability for the whole year.

SCHL Outlook

Source: Scholastic Investor Presentation

Scholastic forecasts profits of $1.40 per share for the current fiscal year, which would mean a decline from $1.83 in 2017. Scholastic’s profitability has seen ups and downs throughout the last decade, in total profits are currently slightly higher than they were in 2009 (earnings of $1.24 per share).

We forecast that profitability will increase substantially over the coming years, though, due to several positives: The first one is the strong line-up of brands & content in the children’s book segment, where Scholastic arguably holds the number one franchise, Harry Potter. The original series has finished about ten years ago, but new stories in the franchise, such as Harry Potter And The Cursed Child or Fantastic Beasts & Where To Find Them will continue to drive sales for Scholastic. Scholastic also publishes other successful series such as I Survived and Dog Man.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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