Value Line Low Total Return Screen (2/8/2013)

Market Barometers

The average Value Line Low Total Return (VLLTR) forecast is 7.3%, down from 7.7% last week.

Companies of Interest

The average low total return forecast for this issue of the Value Line Investment Survey is 6.1% — and the opportunities are a little sparse. The number of material price forecast reductions continues to outnumber the bolstered forecasts this week.

A couple of recent favorites, Schlumberger (SLB) and National Oilwell Varco (NOV) continue to be worthy of further study.

Materially Stronger: Host Hotels (HST), Helix Energy (HLX)

Materially Weaker: Harte-Hanks (HHS), DreamWorks (DWA), Scientific Games (SGMS), Hyatt Hotels (H), Monster Worldwide (MWW), Forest Oil (FST), RPC (RES)

John Wiley & Sons (JW-A)

Christmas Countdown (2013)

The second selection in our annual countdown is something of a surprise, John Wiley & Sons (JW-A).

During times when we seem closer to Fahrenheit 451 than not … in days when some of our favorite bookstores (e.g. Border’s) are shuttering … and when the mainstream media decries the conversion from print media to all things tablet de digital — there may be some contrarian method to the madness of a bookish selection.

We were skeptical when JW-A turned up in our Top Tenth of The Top Percentile screens that power the Core Diem demonstration portfolio over the last couple of days — but after a close look and noting the recent price reduction, we’re thinking open arms … much like a good book and a fireplace.

 

Business Description

John Wiley & Sons, Inc. (JW-A) engages in the publishing of print and electronic products, providing content and digital solutions to customers worldwide.

The company operates through three segments: Scientific, Technical, Medical & Scholarly, Professional/Trade and Global Education. The Scientific, Technical, Medical & Scholarly segment provides content and content-enabled digital services for the scientific, technical, medical and scholarly communities worldwide, including academic, corporate, government and public libraries; researchers; scientists; clinicians; engineers and technologists; scholarly and professional societies; and students and professors. Its products include journals, books, major reference works, databases, clinical decision support tools and laboratory manuals and workflow tools. The Professional/Trade segment acquires, develops and publishes books, workflow solutions, certification and training services and other information services in the subject areas of business, technology, architecture, cooking, psychology, professional education, travel, health, consumer reference and general interest.

It products are developed for worldwide distribution through multiple channels, including major chains and online booksellers, independent bookstores, libraries, colleges and universities, warehouse clubs, corporations, direct marketing and websites. The Global Education segment publishes educational content for two and four-year colleges and universities, for-profit career colleges, advanced placement classes, as well as secondary schools in Australia. It delivers its content, tools and resources to students, faculty and institutions principally through college bookstores and online distributors, with customers having access to content in multi-media formats as well as the traditional textbook. John Wiley & Sons was founded in 1807 and is headquartered in Hoboken, NJ

Business Model Analysis

When you’ve been printing books for over 200 years, you probably know a thing or two about where, when and how to sell them.

The last several years (and a couple years of analyst consensus forecasts) build a steady trend in the 3-4% growth range. If Value Line is right about the 3-5 year forecast, the figure favors the 4% end of that range.

The narrowing of the gap between the top and bottom lines is our first hint of expanding profitability. Apparently after 200 years — they’re also figuring out ways to discover new means of optimization.

The Value Line low total return forecast (LTR) shown here is 15% but that was based on a stock price of $43.20 (11/9/2012). With the price now at $37.40, the adjusted LTR is closer to 20.6%.

Profitability Analysis

The overall profitability trend borders on astonishing considering the economic/competitive environment and market that Wiley wakes up to every day. In this closer look, we see the pressures on net margin results during the Great Recession (2008-2009) and the continued optimism of Value Line in their 3-5 year forecast.

All in all, the trend is pretty powerful and could drive higher P/E ratios going forward. Fahreinheit 451, indeed.

Christmas Countdown (2013)

It’s hard to believe that 2012 is winding down. And with the Wilshire 5000 (VTI) up approximately 15% YTD, it’s time to take a look back at the selections we made during the 2012 Christmas Countdown. Bottom line: The nine selections have a positive relative return of +4.2% and an out performance accuracy of 67%. Santa, we’ll take that.

With a positive relative return of +2.2% for the 2011 selections (and an out performance accuracy of 58.3%) we’ll knock on wood — celebrate the positive outcomes — and start the hunt for stocking stuffers for this year’s countdown.

Christmas Countdown (2013)

Dashboard: 2013 Countdown Stocks