December 14, 2018

McGraw-Hill Ryerson (MHR)

McGraw-Hill Ryerson (MHR) is the major textbook provider for Canadians of all ages.  The company is fond of pointing out that it reaches Canadians at all levels of their education, right from their early years to their professional lives.  The current company is a product of the two large textbook corporations (McGraw-Hill and Ryerson) that combined to form a virtual monopoly within the industry.  With professors and universities still holding students ransom for high textbook costs, and elementary-through-high school education still being a virtual goldmine of tax payer dollars, one would assume that McGraw-Hill Ryerson would be positioned to be an extremely profitable company.  This has not been the case as of yet, and the company has suffered through some lean economic times along with the rest of the print industry.
The McGraw-Hill Ryerson (MHR) website states the company seeks, “To be recognized as the leading Canadian publisher of educational solutions for lifelong learning and enjoyment.”  The company’s mission promises that, “To be the Canadian leader in developing and marketing quality information products and services to selected educational, professional, and consumer markets through innovation, teamwork, and partnerships. We will provide exceptional value to customers, growth and recognition opportunities for employees, and outstanding financial performance to our shareholders.”  While these quotes sound great, obviously many investors out there are not sure of their validity.  The ultra-low price-to-earnings ratio of 10.61 means that either the stock is priced very cheaply and now is the time to snap up the company, or people believe that the business model is intrinsically flawed, and that the losses of the past year were not a fluke or one-time event.

 

McGraw HillMcGraw-Hill Ryerson has the curious distinction of raising its dividend over the past five years, yet having negative sales growth.  I’m not sure if this means that the mature company is running out of innovative ways to find competitive edges within new world of student media, or if they simply are flush with cash and wish to pay it out to their shareholders.  I do know that their 1-year sales loss of nearly 8% and 5-year loss of 6.8% overall do give me pause as I consider whether to recommend them or not.  The odd thing is that their current yield is 2.83% as a result of 21.57% growth over the last 5 years and the company has no debt to speak of.  Anytime a stock as a P/E of less than eleven, has a yield near 3%, a massive competitive advantage within their region (Canada), and a solid balance sheet, they should really be considered.

 

The problem with recommending the textbook giant is that current trends amongst students are aimed at lessening the profits McGraw-Hill Ryerson (MHR) is seeing.  Post-Secondary students on a budget are taking advantage of used book websites.  Kindle readers and other technologies are also likely cutting into McGraw-Hill Ryerson’s profit margins.  Information in general today is much easier to access than ever before and this does not bode well for such a focused company in that specific market such as McGraw-Hill Ryerson (MHW).  If the company can evolve and adjust to new trends in the market, this could be an ideal time to snap up the stock; however, given the past five years, and the obstacles I just outlined, I would definitely do my homework before committing to a position.

McGraw-Hill Ryerson (MHW) Dividend Stock Graph:

TSE MHR

 

McGraw-Hill Ryerson (MHW) Dividend Metrics:

TickerNamePriceDividend YieldPayout RatioINDUSTRY_SUBGROUPDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
MHRMcGraw-Hill Ryerson Ltd42.812.6693.46Publishing-Books0.0023.9372.42

Trackbacks

  1. […] giants when it comes to delivering media through television and radio.  McGraw-Hill Ryerson Ltd. (MHR), Torstar Corp (TS/B) and FP Newspapers Inc (FP) are all in the print media business (which has […]

Speak Your Mind

*