GHC - Graham Holdings Company: Lack Of Growth And Poor Capital Allocation Dilute Confidence On Dividend Outlook
2024-04-06 06:34:28 ET
Summary
- Share price hugged the $600 level since early 2021 until November 2023 when it began an ascent to $750 on little fundamental news, other than a small acquisition.
- Long-term growth prospects for the Automotive dealership business unit and the Broadcasting business are flat to negative.
- The largest business unit, Education, is now facing cultural headwinds domestically in the USA and leaving international as the best option for growth but in a fragmented regulatory environment.
- History of poor capital allocation as shown by repeated goodwill impairments indicate habit of overpaying for acquisitions and eroding the profit margins of the business as a whole.
- Doubtful outlook for Graham's ability to continue increasing dividends unless these issues are fixed leads to a Sell rating. Would move to Hold at $650.
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