Investment Thesis
McGraw Hill exhibits fundamental weakness despite operational profitability, with stagnant revenue growth at +0.1% YoY and excessive leverage (3.53x D/E) that consumes nearly all earnings through interest expense, resulting in only 1.7% net margins and anemic returns (4.9% ROE, 0.6% ROA). Liquidity ratios below 1.0 combined with $2.6B debt burden create financial stress in a mature, non-growing publishing business.
Strengths
- High gross margin of 80.9% demonstrates strong pricing power and content distribution efficiency
- Positive free cash flow of $246.3M with 11.7% FCF margin provides debt servicing capacity
- Operating margin of 13.2% shows underlying business generates profitability before financing costs
Risks
- Revenue growth stalled at +0.1% YoY indicating mature business with no expansion prospects
- Excessive leverage at 3.53x Debt/Equity with $2.6B long-term debt consuming most operational profits through interest expense
- Critical liquidity concerns with current ratio 0.77x and quick ratio 0.61x indicating potential short-term payment difficulties
Key Metrics to Watch
- Revenue growth trajectory and market demand for publishing services
- Debt reduction progress and interest coverage ratio sustainability
- Working capital trends and liquidity position to assess refinancing risk
Financial Metrics
Revenue
2.1B
Net Income
35.3M
EPS (Diluted)
$0.19
Free Cash Flow
246.3M
Total Assets
5.5B
Cash
253.5M
Profitability Ratios
Gross Margin
80.9%
Operating Margin
13.2%
Net Margin
1.7%
ROE
4.9%
ROA
0.6%
FCF Margin
11.7%
Balance Sheet & Liquidity
Current Ratio
0.77x
Quick Ratio
0.61x
Debt/Equity
3.53x
Debt/Assets
86.8%
Interest Coverage
N/A
Long-term Debt
2.6B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-06-13T07:29:45.078361 |
Data as of: 2026-03-31 |
Powered by Claude AI