GHC

We rate Graham Holdings Co (GHC) as a Hold with a composite score of 55.5/100 at a current price of $1067.05. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (89th percentile) and momentum (76th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (39th percentile) and investment (40th percentile) tempers our overall conviction. We assign a No Moat rating (29/100), Low uncertainty, and Standard capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Graham Holdings Co holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 55.5/100 places it at rank #1206 in our full 7,333-stock universe. At $5.1B in market capitalization, Graham Holdings Co is a mid-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 8% and favorable momentum (76th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 29% (-30.3pp vs sector) narrow to operating margins of 6% (+2.0pp vs sector) and net margins of 5.4%, yielding a gross-to-net conversion rate of 18%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $1067.05, Graham Holdings Co is trading near fair value based on current fundamentals. Our value factor score of 58/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 17.9x (a 25% discount to the sector median of 23.7x), EV/EBITDA of 16.8x (at a premium), P/B of 1.1x, P/S of 1.0x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to Graham Holdings Co. The company exhibits strong financial stability with a beta of 0.77, conservative leverage (16% D/E), and a stability factor in the 89th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

We identify no major risk factors at this time. The company's stability factor sits at the 89th percentile with quality at the 39th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: conservative leverage (16% D/E) limits balance sheet risk; above-average stability (89th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Graham Holdings Co's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 6.0%, and the balance sheet is managed within acceptable parameters (D/E: 16%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Graham Holdings Co falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.61% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Graham Holdings Co receives a Hold rating with a composite score of 55.5/100 (rank #1206 of 7,333). Our quantitative framework assigns a No Moat (29/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 61/100.

Our analysis supports a neutral stance on Graham Holdings Co. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.