Jeffrey Silber, Managing Director and Senior Analyst at BMO Capital Markets Corp., says Houghton Mifflin Harcourt Co (HMHC) is expensive based on any metric. But, he thinks the company is well-positioned in the K-12 publishing sector.
“They are the largest publisher for the K-12 sector, and last year — for the first time in a while — you saw some decent growth in terms of states and local school districts increasing the amount that they were spending on K-12 publishing,” Silber says. “Not only did they have the money for the first time because tax receipts went up, but you also had a number of product lines where there were new adoption cycles in California and Texas and Florida and other states.”
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Those factors created what Silber calls “the perfect storm” for Houghton Mifflin, and the company had one of the best quarters in its history last fall. In addition, they recently acquired the ed tech business of Scholastic (SCHL).
“Obviously, like any market in the media sector, we’re seeing a move from print to digital, so they wanted to accelerate their own move there as well, and I think that acquisition pushes them in that direction,” Silber says.
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