Publishing group Bloomsbury (BMY) is a pandemic winner which has kept on winning since Covid.
Lockdown saw people rediscover their love of reading, and the company has tapped into and exploited through successful marketing some popular trends in fiction which have helped drive a big increase in returns.
That has meant Bloomsbury’s return on capital employed has more than doubled from 8.2% in 2019 to 19.1%, according to data from Stockopedia.
This has been matched by an extremely strong share price performance which has driven the stock to record levels.
However, any investors thinking they may have missed the boat should think again. Based on Berenberg’s analysis, the company is trading bang in line with its five-year average price-to-earnings ratio of 17.5 for the 12 months to February 2026.
And yet Bloomsbury is a better business now than it was in 2019. Read on to discover the catalysts which can propel the stock to fresh highs.
BACKGROUND ON BLOOMSBURY
Bloomsbury was founded in 1986 by the current chief executive Nigel Newton and three others. Its initial success can be traced to the decision to sign then unknown author J.K. Rowling and the subsequent publication of the hugely successful Harry Potter series. When the initial phase of Pottermania eased, Bloomsbury’s fortunes waned with it.
However, a shift away from focusing purely on consumer titles, begun nearly two decades ago, has served it well. So, while ‘romantasy’ author Sarah J. Maas has been a notable success, it is not so reliant on one big literary franchise.
Other recent triumphs – apart from fiction titles – include Hugh Fearnley-Whittingstall’s How to Eat 30 Plants a Week, which shot to number one in the Sunday Times bestseller list, Georgina Hayden’s Greekish; and Poppy O’Toole’s Poppy Cooks: The Actually Delicious Air Fryer Cookbook.
As well as having a strong footprint in fiction and non-fiction consumer titles, the company has a meaningful presence in academic publishing, bolstered by its May 2024 acquisition of assets from US outfit Rowman & Littlefield for £65 million, which added more than 40,000 academic titles to the company’s library.
This has created a portfolio with a decent spread across different genres, digital and print formats and geographies. On 24 October the company announced revenue and pre-tax profit rose 32% and 58% respectively for the first half of the year as it boosted full-year guidance.
WHAT IS BLOOMSBURY’S GROWTH STRATEGY?
Alongside its results for the year to February 2024, the company unveiled a new three-pronged strategy based on growth, portfolio and people.
This means acquiring more assets to increase its share of the academic market, discovering talented new authors and expanding internationally in countries like the US and India (as well as being the best place to work in publishing).
The potential in some of its top titles is not necessarily fully factored into analysts’ forecasts. Berenberg highlights that £30 million of incremental revenue from Sarah J. Maas’ latest title, due out next year, would boost its earnings forecast for 2026 by 10%.
There is scope for interest in Harry Potter and Sarah J. Maas to be stoked by television adaptations which are at varying degrees of being progressed. This could boost interest in relevant backlist titles (those over 12 months old), which account for a significant chunk of Bloomsbury’s sales.
Delivering content in a digital format allows Bloomsbury to generate revenue from this backlist of previously published books at very limited additional cost, benefiting margin performance – and a natural shift here should benefit the business.
The academic arm is also seeing a continuing move to digital, amid growing take-up of the Bloomsbury Digital Resources platform, with its own positive implications for profitability.
If that wasn’t enough Bloomsbury has a strong balance sheet which underpins a progressive dividend policy and recently reiterated its intention to increase the dividend for the current financial year, even if the 2.3% yield is relatively modest.
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