Why Wiley Stock Dropped 8% Today
Wiley stock remains expensive at 19 times expected free cash flow even after the sale.
Publisher John Wiley & Sons (WLY -8.71%) (JW.B -10.87%) It was down 8.4% as of 10:40 a.m. ET on Thursday after reporting mixed earnings in its fiscal first-quarter 2025 report this morning.
Analysts had expected the research and education publisher to earn $0.55 per share (adjusted for one-time items) on $387.4 million in the first quarter. Wiley reported better-than-expected revenue of $403.8 million, but earnings were worse than expected, coming in at just $0.47.
John Wiley Q1 Results
The good news. The bad news is that Wiley’s $0.47 profit is a non-GAAP figure. When calculated according to generally accepted accounting principles (GAAP), Wiley actually lost $0.03 per share for the quarter. (However, this is an improvement over last year’s first-quarter loss of $1.67 per share.)
CEO Matthew Kisner said he was “pleased” with the start to fiscal 2025, calling 3% growth in Wiley’s research publishing unit “solid” and highlighting 14% revenue growth in academic course software that Wiley used generative AI to drive. But the “professional” side of the company’s learning division was a drag on results, dragging the unit down to 1%. decrease In sales.
Simply put, Wiley’s smallest division got smaller, its largest division grew just 3%, and overall revenue fell 10.5%.
That’s not a good thing.
Should I sell my Wiley stock?
But it could get better.
Back to the guidance, Wiley forecasts total revenue growth of about 3% in fiscal 2025, with both business units growing at least in the low single digits and research potentially in the mid-single digits. Adjusted earnings are forecast to grow about 23% to $3.42 per share, which is actually higher than Wall Street had been expecting. And free cash flow could grow about 10% to $125 million.
The problem is that if Wiley were to achieve this number, the stock would sell for a price-to-free cash flow ratio of nearly 19 (and that’s without taking into account Wiley’s $800 million+ net debt load). That seems too expensive for a single-digit growth company with a high debt load.
Wiley stock remains a sell.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
