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Investing.com - Baird has initiated coverage on McGraw Hill (NYSE:MH) with an Outperform rating and a price target of $21.00, representing significant upside potential from the current price of $13.35, which sits near its 52-week low of $12.55.
The research firm considers the valuation attractive at approximately 8.3x and 7.0x the company’s fiscal 2027 and fiscal 2028 estimated adjusted earnings per share, respectively. According to InvestingPro data, the company currently generates a robust free cash flow yield of 19%, though it’s currently not profitable with a -$0.49 EPS over the last twelve months.
Baird highlighted McGraw Hill’s position as a high-margin business with strong unlevered free cash flow that provides important solutions in a stable market characterized by limited competition, incumbency advantages, and barriers to entry. InvestingPro data confirms this assessment, revealing an impressive gross profit margin of 80.11% and steady revenue growth of 6.65% over the last twelve months.
The firm acknowledged potential headwinds in fiscal 2026 due to multi-year K-12 market procurement cycle dynamics, but expects post-IPO expectations to align appropriately with these challenges.
Baird expressed confidence in McGraw Hill’s intermediate-term outlook, citing the company’s ability to maintain high market share with potential future gains due to its high-quality content, digital transition efforts, trusted brand, and established market position and distribution capabilities.
In other recent news, McGraw Hill reported first-quarter fiscal 2026 results that surpassed revenue expectations, achieving a total revenue of $535.7 million. This marks a 2.4% increase year-over-year, primarily driven by strong digital and recurring revenue growth. In analyst coverage, Goldman Sachs initiated coverage on McGraw Hill with a Buy rating and set a price target of $27.00, citing the company’s successful digital transformation. Similarly, JPMorgan began coverage with an Overweight rating and a $21.00 price target, highlighting McGraw Hill’s position as a leading provider of education solutions. UBS, on the other hand, initiated coverage with a Neutral rating and a $15.00 price target, noting the challenges of market share gains in a tougher market. These recent developments reflect varying analyst perspectives on McGraw Hill’s market position and future potential.
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