Premium content from Motley Fool Hidden Winners UK
Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.
“Best Buys Now” Pick #1:
Bloomsbury Publishing (LSE:BMY)
Why we like it: “Bloomsbury (LSE: BMY) owns the print rights for the Harry Potter books in the UK, and remarkably, the first book in the magical wizard series is the third-bestselling children’s book of this year, some 26 years after it was first published. Talk about valuable intellectual property! The company is also nurturing star author Sarah J Maas, publishing 15 titles so far by the popular fantasy novelist, whose catalogue of titles saw a whopping 51% rise in sales in the last year.
“But while strong sales of consumer titles are welcome, its non-consumer division – representing roughly 37% of total sales last year – could provide a substantial long-term growth driver. The company has transformed into a serious player in education in recent years. Through its digital platform – Bloomsbury Digital Resources (BDR) – the company provides educational resources to academic libraries and institutions. Bloomsbury expects that BDR should achieve organic sales growth of around 40% by 2027/28 – and it also represents a tantalising margin opportunity, in our view.”
Why we like it now: In its previous financial year, Bloomsbury recently announced record sales (up 15% to £264.1 million) and profit (up 16% to £31.1 million), surpassing both market expectations and industry averages. This success is attributed to a surge in digital revenues and international expansion. It continues to perform well, recently announcing that both sales and profit grew by 11% in the last six months. It boasted a strong cash balance of £39.1m as of the end of August – giving it “significant opportunities for further acquisitions and investment in organic growth”. The company’s long-term strategy is to deliver high margin, repeatable revenues from digital subscriptions. Renewal rates for its Bloomsbury Digital Resources platform are above 90% and the company says it is “confident” in its longer-term margin targets.
