Bloomsbury Publishing (LSE:BMY), the global book publisher best known for Harry Potter, has been restructuring in a bid to grow its digital academic offering. Its share price has seen a 15% rise since the beginning of the year, and I think it has further to go.
Since taking a punt on JK Rowling back in 1996, the gamble has paid off astronomically. Along with the many millions of other fans, my children continue to love Harry Potter and have read the books and listened to the audiobooks many times over. I imagine the series will continue to be a timeless classic for many more children to come and therefore a reliable revenue stream for Bloomsbury to count on.
More recently though, Bloomsbury has had further success at picking star authors with bestsellers in both the children’s and adult markets, from the likes of Katherine Rundell, Madeline Miller and Elizabeth Gilbert.
Seeking digital fortunes
However, aside from the success of its fictional contributions, Bloomsbury has a huge part to play in the publication of academic, professional and special interest books. Some 80% of its 60,000 books in print fall into this sector.
In 2016, the company began rolling out its 2020 digital strategy, which includes speeding up the growth of its digital revenues, while repositioning as a digital business-to-business publisher for academic libraries worldwide. These digital resources hold the keys to future fortunes and higher profit generation, I feel. This is a £3.4bn worldwide market and as such is expected to produce around £5m of operating profit and £15m in revenues for Bloomsbury by the end of the 2021-22 financial year. Its board is saying the performance for the year ending 28 February 2020 should be in line with management expectations.
Continuing the digital theme, the group has been upping its game in drama too. In its July trading update, the company stated that Bloomsbury Digital Resources had announced a high-level partnership with the National Theatre, which further endorses and enhances the profile of its award-winning Drama Online platform, expanding its video offering with National Theatre content.
The company is not shy of making acquisitions having completed 22 of them in the past 19 years at a cost of £90m. But it’s not piling on debt and Bloomsbury has a low debt ratio of 30%, with plenty cash on hand (£27.6m as of late February) for further acquisitions if anything suitable should arise.
The group has a £176m market cap, which has grown from £125m in 2017. Its earnings-per-share is currently 12.2p and it offers a reasonable dividend yield of 3.5%, which it has now raised annually for 24 years. Its price-to-earnings ratio is 19, up from 15 at the end of February. This increase suggests growth and shows a potentially worthwhile investment.
So, should I buy shares in Bloomsbury Publishing? Yes, I think I should. I like it for both its reliable dividend and continued growth potential.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.