GRAHAM HOLDINGS CO (GHC): what the price requires

At today's price, GRAHAM HOLDINGS CO (GHC) is priced for -1.0% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/GHC

Headline

FieldValue
TickerGHC
CompanyGRAHAM HOLDINGS CO
Current price$1192.97/sh
CompositionKaplan International 26% / Kaplan Higher Education 8% / Kaplan Supplemental Education 8% / Television Broadcasting 10% / CSI (Healthcare) 11% / Manufacturing 10% / Automotive 27%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed1.7%
Operating margin today5.5%
Margin compression implied-3.8pp
Implied growth-1.0%
Multiple paid18x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 7.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.7pp.

Reconcile: at the x-ray's 9.3% required return this reads ~13.8%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.11σ
cohort percentile (of 210 peers)52
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.09x5expensive
Earnings2.19x4expensive
Relative0.51x5justifies
Growth1.14x3expensive

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.4%); the inversion above states its own rate.

Per-Model Detail (n=17)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$1043.351.14xyesFCF base $0.3B, growth 3% (input: historical growth), terminal g 2.5%, WACC 7.4%, 5yr projection
DCF Exit MultipleGrowth$1128.481.06xyesExit EV/EBITDA: 17.9x / 19.9x / 21.9x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$1012.931.18xyesP/E 18x (static sector reference · 2026-04), scenarios: 15.2x / 18.0x / 20.8x (bear / base = reference held flat / bull), EV/EBITDA 14.37x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$721.771.65xyesBV/sh $1095.03, ROE (TTM) 6.1%, ke 9.3%
Two-Stage Excess ReturnAsset$572.062.09xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$839.081.42xyesRev $4.9B, growth 3% (input: historical growth; tapered), Terminal P/S: 0.9x / 1.1x / 1.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$2326.450.51xyesEPS $66.47, growth 35% (input: historical EPS growth), PEG=0.51 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$153.987.75xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.20B × (1−36%) / WACC 7.4% → EPV (no growth)
Residual IncomeAsset$552.432.16xyesBV $1095.03 + 5yr PV of (ROE (TTM) 6.1% − Kₑ 9.3%) × BV; BV grows 4.0%/yr
Graham NumberAsset$1279.720.93xyes√(22.5 × EPS $66.47 × BVPS $1095.03) — Graham's conservative floor
EV/EBITDA RelativeRelative$623.071.91xyesEBITDA $0.32B × sector EV/EBITDA 12.0x
FCF YieldEarnings$438.632.72xyesFCF $275.3M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$2144.770.56xyesEPS $66.47 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$77.5015.39xyesBV $1095.03 × (ROIC 0.5% / WACC 7.4%)
P/Sales SectorRelative$2804.680.43xyesRevenue $4.91B × sector P/S 2.5x
PEG Fair ValueRelative$2492.630.48xyesEPS $66.47 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$718.591.66xyesEPS $66.47 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$637.9m
Net debt / NOPAT (after-tax)3.69x
Net debt / operating income (pre-tax)2.37x
Interest coverage1.9x
Share count CAGR (buyback)-3.2%
Burning cashno

Bullet Takeaways

The obvious worry about Graham Holdings is that it is a sprawling conglomerate (education, broadcasting, healthcare, manufacturing, and automotive) with no single identity. The data softens that fear: at $1,145 the price implies roughly flat to slightly negative operating growth, a low bar the diversified base can clear.

The valuation is genuinely undemanding for a profitable, asset-rich company. The price is justified by relative-multiple and growth-DCF lenses; only the asset-based and earnings-power frames call it expensive, and several methods land well above the quote.

The trade-off is complexity and modest current margins (4.8% trailing operating margin) plus a net debt position. Q1 2026 showed revenue up 6% and adjusted EPS up sharply, helped by a Kaplan unit sale. This is a value-and-sum-of-parts story, not a growth one.

Bull Case

The first thing a skeptic says about Graham Holdings is that it is an incoherent grab bag: Kaplan education businesses, a television broadcasting group, a healthcare arm, manufacturing, and a large automotive dealership operation, with no thread connecting them. That is a fair description, and the data shows why it may not matter as much as the fear suggests. The price implies roughly flat to slightly negative operating growth over the next five years, a near-2.3% annual decline. That is a remarkably low bar. A diversified holding company with seven distinct revenue streams does not need any one of them to be a star; it needs the portfolio in aggregate to not shrink, and the breadth itself is what makes flat-to-modest the realistic base case rather than an optimistic one.

The recent results undercut the decline thesis the price embeds. Q1 2026 revenue rose 6% to $1,236.0 million, with growth at education, television broadcasting, healthcare, and manufacturing, partially offset by softness at automotive. Operating income climbed to $57.8 million from $47.5 million, and net income attributable to common stockholders rose to $29.1 million, or $6.62 diluted EPS, from $5.45. Excluding a $19.0 million Kaplan Languages impairment and securities losses, adjusted net income reached $73.9 million, or $16.79 per diluted share, up from $11.64 a year earlier. A company priced for decline that just grew revenue 6% and lifted adjusted earnings by nearly half is doing better than its own implied assumption.

The structural appeal is the sum-of-the-parts and active capital management. Graham Holdings completed the sale of Kaplan Languages Group to Inspirit Capital, a reminder that management actively prunes and reshapes the portfolio rather than letting it drift. The largest segments by revenue, automotive at 27% and Kaplan International at 26%, sit alongside a steady CSI healthcare business and a defensible television broadcasting franchise, each with its own cycle. The share count has been declining (a roughly 3% annual reduction), which means each remaining share owns more of the collection over time. Against the education peer set of K12, Strategic Education, Grand Canyon, and Laureate, Graham is the rare name where education is only one leg of a diversified, cash-generative whole. The valuation does not ask you to believe in growth; it asks you to believe the parts are worth more than a decline-implying multiple, and the Q1 print argues they are.

Bear Case

The bear case turns on which future revenue streams are baked into the price and how fragile the weakest one is. Graham Holdings is a collection of businesses, and the largest by revenue is automotive at 27%, the very segment that declined in Q1 2026. Automotive dealership economics are cyclical and rate-sensitive: vehicle affordability, financing costs, and consumer demand all move with the macro, and a 27% revenue concentration in a softening business is a meaningful drag on the whole. The price may imply only modest growth, but a conglomerate is only as steady as its biggest leg, and that leg is currently shrinking. If automotive weakness deepens, the diversified-stability argument that supports the valuation weakens with it.

The second problem is that the asset and earnings lenses, the ones best suited to value a collection of operating businesses, say the price is expensive. Earnings-power value lands near $157, a fraction of the $1,145 (June 27, 2026) quote, and the two-stage excess-return frame lands near $572. The relative-multiple and growth-DCF methods are what lift the valuation toward the price, and those lean on peer comparisons and forward projections rather than on the cash the businesses currently produce. A 4.8% trailing operating margin is thin for a company of this scale, and much of the reported earnings strength in Q1 came from adjustments, the $16.79 adjusted EPS versus $6.62 GAAP gap is driven by excluding a Kaplan impairment and securities losses. Reported, unadjusted earnings power is more modest than the headline suggests.

The third issue is the conglomerate discount and the leverage behind it. The company carries net debt of roughly $638 million, with net debt to operating income around 2.7 times and interest covered only about 2 times, a thinner coverage than the diversified-and-safe framing implies. Conglomerates trade at a discount for a reason: capital can be allocated across unrelated businesses in ways outside shareholders cannot easily evaluate, segment results are harder to compare, and the whole can mask underperformance in the parts. The Kaplan Languages impairment is a small example of value erosion inside the collection. The bull case rests on the parts being worth more than the market gives them; the bear case is that a sprawling, modestly profitable, moderately leveraged holding company with a cyclical largest segment may deserve exactly the discount it trades at, and that the adjusted-earnings strength flatters a business whose unadjusted economics are merely adequate.

Valuation

Inverting the price gives an unusually relaxed assumption. At $1,145.52 the market is paying about 18 times company-wide operating income, which at a 7.1% cost of capital implies operating growth of roughly negative 2.3% a year for five years. In plain terms, the price assumes the collection of businesses slightly shrinks. The priced-in assumption reads as within range, and the company's own history puts that near-term pace within what it has recently delivered, so the stretch, if any, is in duration rather than rate.

The model X-ray splits in the pattern of a diversified holding company. The relative-multiple and growth-DCF families justify the price: DCF perpetual growth lands near $1,060, DCF exit multiple near $1,096, relative valuation near $1,006, and several peer-multiple methods land far above the quote (Peter Lynch near $2,326, Ben Graham formula near $2,145). The asset-based and earnings-power families say expensive: earnings-power value near $157, two-stage excess return near $572, residual income near $552. The blended cross-method anchor sits near $1,033, just under the price. The dispersion is wide because a conglomerate is genuinely hard to value with any single lens, which is itself the argument for weighing the sum-of-parts rather than any one method.

The balance sheet is adequate but not a strength. Net debt is about $638 million against roughly $235 million of trailing operating income, putting net debt to operating income near 2.7 times and interest coverage around 2 times, modest cushions for a business of this complexity. The Q1 2026 results, revenue up 6% and adjusted EPS up to $16.79, plus the completed Kaplan Languages divestiture, are real and material to the forward view. The reasonable conclusion is that Graham Holdings is a profitable, diversified, actively managed holding company priced for slight decline, where the upside comes from the parts proving more valuable than the discount implies, not from growth. It is a value and sum-of-the-parts case, and the modest implied bar is the most attractive thing about it.

Catalysts

The Q1 2026 report was the most recent catalyst and a constructive one. Revenue rose 6% to $1,236.0 million, with gains at education, television broadcasting, healthcare, and manufacturing partially offset by declines at automotive. Operating income increased to $57.8 million from $47.5 million, and diluted EPS rose to $6.62 from $5.45. Excluding a $19.0 million Kaplan Languages impairment and securities losses, adjusted net income was $73.9 million, or $16.79 per diluted share, up from $11.64 a year earlier. (Sources: StockTitan 8-K and 10-Q summaries; Sahm Capital; Graham Holdings investor releases.)

The portfolio-reshaping catalyst was the completed sale of Kaplan Languages Group to Inspirit Capital, which took a $19 million charge but simplifies the education arm. Looking forward, the variables to watch are the automotive segment, the 27% revenue concentration that softened in Q1 and carries the most cyclical risk, the stability of the Kaplan education franchises, and any further divestitures or acquisitions that crystallize the sum-of-the-parts value. Because the price already assumes mild decline, the upside catalyst is straightforward: continued revenue growth, steady segment performance, or value-accretive capital allocation would each argue the decline-implying multiple is too pessimistic for a diversified, cash-generative holding company. (Sources: StockTitan; Sahm Capital; stockanalysis.com.)

Peer Cohorts (Per Segment, With Filing Citations)

Kaplan International (reported)

Kaplan Higher Education (reported)

Kaplan Supplemental Education (reported)

Television Broadcasting (reported)

CSI (Healthcare) (reported)

Manufacturing (reported)

Automotive (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive GHC report on boothcheck