Scholastic: Challenged, As Expected

Summary

  • Scholastic's acquisition and aggressive buybacks depleted its net cash position, increasing net debt and pressuring shares amid stagnant performance.
  • Despite shares appearing cheap after a significant decline, ongoing business struggles and a poor track record make valuation alone an insufficient reason to invest.
  • M&A and buybacks at higher prices, plus threats from AI and tariffs, add to concerns about the company's future profitability and stability.
  • While real estate assets offer some upside, lack of near-term catalysts and negative organic growth keep me cautious despite a more balanced risk-reward profile.
  • Looking for a helping hand in the market? Members of Value In Corporate Events get exclusive ideas and guidance to navigate any climate. Learn More »

Schoolchildren studying at chemistry lesson in classrom. Pupils writing in notebook, holding flasks with liquid for experiments and have fun together. School education.

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In spring of 2024 I concluded that Scholastic (NASDAQ:SCHL) had to go back to school itself. This came after the business announced an acquisition which depleted its net cash position.

The announcement of the transaction

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This article was written by

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The Value Investor has a Master of Science with specialization in financial markets and a decade of experience tracking companies via catalytic company events.

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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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