Assessing Graham Holdings (GHC) Valuation After New SWE Education Partnership

PPI, a Kaplan subsidiary under Graham Holdings (GHC), has been chosen as the exclusive licensure prep partner for the Society of Women Engineers. This provides investors with a fresh data point on the company’s professional education footprint.

See our latest analysis for Graham Holdings.

The recent education partnerships come against a backdrop of steady recent momentum, with a 7 day share price return of 3.68% and a 1 year total shareholder return of 22.14%, supported by a 3 year total shareholder return of 89.13%.

If the education story has your attention, it can be worth widening your research lens and checking out 19 top founder-led companies

With shares up 22.14% over the past year and trading around $1,100 despite an intrinsic value estimate that is materially higher, the key question now is simple: is there still a buying opportunity here, or is the market already pricing in future growth?

Price-to-Earnings of 16.5x: Is it justified?

On a P/E of 16.5x and a last close of $1,100.01, Graham Holdings screens cheaper than both its direct peer group on 19.2x and the wider US Consumer Services industry on 18.4x.

The P/E ratio simply tells you how much investors are paying today for each dollar of current earnings. For a diversified group like Graham Holdings, with exposure to education, healthcare, manufacturing, media and automotive, it becomes a shorthand gauge for what the market is willing to pay for a mix of mature and developing businesses under one roof.

Here, the current P/E below peers suggests the market is not paying a premium for those earnings, despite a record of 10.5% annual earnings growth over the past five years and a value_score of 4 out of 6 on Simply Wall St checks. At the same time, earnings over the last year have been affected by weaker profit margins (a 5.9% margin compared with 15% the year before) and a large one off gain of $178.3m, which can make recent numbers harder to interpret in isolation.

Compared with the US Consumer Services industry average P/E of 18.4x, Graham Holdings sits at a discount, which points to the market assigning a lower multiple than the sector benchmark. Against its direct peer set on 19.2x, that discount is even clearer, hinting that investors are pricing Graham Holdings below where similar companies trade, despite the group exceeding the Consumer Services industry one year return of a 8.4% decline.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 16.5x (UNDERVALUED)

However, the wide mix of education, media, healthcare, manufacturing and automotive businesses, along with a price target below the current share price, could challenge any simple undervaluation case.

Find out about the key risks to this Graham Holdings narrative.

Another view on value: DCF paints a different picture

If the P/E of 16.5x hints at a discount, the SWS DCF model goes much further, with an estimated fair value of $2,723.61 per share versus a market price of $1,100.01. Trading about 59.6% below that level, is Graham Holdings a value trap or a value gap waiting to close?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Graham Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 62 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Does this mix of potential upside and clear risks fit with how you see the business, or does it feel out of step with the current price? Act while the details are fresh in your mind, review the full picture for yourself, and weigh the 1 key reward and 2 important warning signs

Looking for more investment ideas?

If this valuation story has you thinking about your next move, do not stop at one company. Broaden your watchlist with focused stock ideas built from solid data.

• Target resilient income by checking out 11 dividend fortresses that aim to combine higher yields with staying power through different market conditions.
• Hunt for mispriced quality and review the 62 high quality undervalued stocks that pair stronger fundamentals with compressed valuation multiples.
• Protect your downside first and scan the 73 resilient stocks with low risk scores that score well on financial strength and business stability.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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