Simple Concepts Research Group

Is Scholastic (NASDAQ: SCHL) A Buy Or Sell At This Price?

by | Jan 18, 2022 | Stock Picks

Scholastic (SCHL) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for Scholastic Corp (SCHL) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

Scholastic Fundamentals

SCHL Stock Rating

Stock Price Target: $52.81

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for Scholastic in comparison to the Publishing industry and the S&P 500.

Scholastic is a Small Cap company with a Market Cap of $1.49B.

How are investors using Scholastic earnings yield to assess the company?

Scholastic (SCHL)_ Earnings Yield in Comparison to the Publishing Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for Scholastic is 12.03%, in comparison to 3.76% for the S&P 500 and 1.78% for the 10-year treasury bond. The median earnings yield for the Publishing industry is 10.45%.

What does Scholastic Price-to-Earnings Ratio (P/E) tell investors about the company?

Scholastic (SCHL)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Publishing Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

Scholastic is currently trading at a P/E of 42.28. The P/E for the Publishing industry is 16.69 and the P/E for the S&P 500 is 26.59.

What is the current Price-to-Sales Ratio (P/S) for Scholastic?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

Scholastic is currently trading at a P/S of 1.13. The P/S for the Publishing industry is 1.05 and the P/S for the S&P 500 is 3.19.

How does Scholastic Price-to-BookRatio (P/B) compare to the Publishing industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

Scholastic P/B ratio is 1.25. The P/B for the Publishing industry is 2.04 and the P/B for the S&P 500 is 4.81.

How attractive is Scholastic Return on Invested Capital (ROIC) to investors?

Scholastic (SCHL)_ Return on Invested Capital in Comparison to the Publishing Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

Scholastic ROIC is currently 2.80% in comparison to 5.59% for the Publishing industry and 9.10% for the S&P 500.

Scholastic (SCHL)_ Price Target & 52-Week Price Range

How has SCHL stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, Scholastic has traded between the range of $24.69 and $43.54.

The current Analyst Price Target for Scholastic is $52.81.

What is Scholastic YOY Performance in comparison to its industry and the total market?

The YOY performance for Scholastic is 64.79%. The Publishing industry has a YOY performance of 4.70% in comparison to the YOY S&P 500 performance of 22.67%.

Scholastic (SCHL)_ YoY Performance in Comparison to the Publishing Industry and the S&P 500

Recent Financial Results (Q2, 2022)

  • Consolidated revenues increased 29% to $524.2M in the second quarter versus the prior year period, primarily driven by higher revenues in the U.S. book fairs and education channels
  • Second quarter operating profit improved 71% to $83.4M versus the prior year period primarily due to the favorable results in the U.S. book fairs channel and the higher revenues from the education solutions business
  • Company recognized a gain of $6.2M on the sale of a facility located in Lake Mary, FL
  • Net cash provided by operating activities of $78M compared to $46.1M in the prior year period
  • Free cash flow of $75.4M in the second quarter compared to $30.9M in the prior year period
  • Cash and cash equivalents exceeded total debt by $286.4M, compared to $161.8M a year ago
  • The higher net cash position and the $44.5M increase in free cash flow was primarily driven by the increase in revenues resulting in higher cash collections in the quarter compared to the prior period

Stock Price Target: $52.81

Company Overview

SCHL Stock Rating

Scholastic publishes and distributes children’s books worldwide. It operates in three segments: Children’s Book Publishing and Distribution, Education, and International. The Children’s Book Publishing and Distribution segment publishes and distributes children’s books, e-books, media, and interactive products through its school book club and school book fair channels, as well as through its trade channel.

The company distributes its products and services directly to schools and libraries through retail stores and the Internet. Scholastic Corporation was founded in 1920 and is headquartered in New York, New York. The current CEO is Peter Warwick.

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This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.