My Market Wizard

VALUE LINE INC 10-Q Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

VALUE LINE INC

Filing date:

03/14/2025

TLDR:

ELI5:

Value Line, a company known for investment research, had a mixed quarter. Its core business of selling investment subscriptions is facing challenges, but its investment in another company (EAM Trust) helped boost overall profits.

Accession #:

0001437749-25-007788

Published on

Analyst Summary

  • Total publishing revenues decreased by 1.8% for the three months and 6.3% for the nine months ended January 31, 2025, primarily due to a decrease in copyright fees and investment periodicals revenue.
  • Operating expenses increased by 7.3% for the three months and 3.4% for the nine months ended January 31, 2025, driven by higher advertising, production, and administrative costs.
  • Income from Value Line’s non-voting revenues and non-voting profits interests in EAM Trust increased significantly, offsetting the decline in income from operations.
  • Gross Profit Margin decreased for both the three-month and nine-month periods, indicating a lower percentage of revenue remaining after covering production costs.
  • Operating Profit Margin decreased for both the three-month and nine-month periods, indicating a lower percentage of revenue remaining after covering operating expenses.
  • Net Profit Margin decreased for the three-month period but increased for the nine-month period.
  • EPS decreased for the three-month period but increased for the nine-month period.
  • The current ratio increased, indicating improved short-term liquidity.
  • The debt-to-equity ratio decreased, indicating a slightly lower level of financial leverage.
  • Revenue decreased by 6.29% for the nine months ended January 31, 2025 compared to the nine months ended January 31, 2024.
  • Net income increased by 17.58% for the nine months ended January 31, 2025 compared to the nine months ended January 31, 2024.
  • EPS increased by 17.88% for the nine months ended January 31, 2025 compared to the nine months ended January 31, 2024.

Opportunities and Risks

  • Market Volatility: Fluctuations in the stock market can impact subscription sales and the performance of EAM Trust, affecting Value Line’s revenue and profitability.
  • Competition: The availability of free or low-cost investment information online poses a significant threat to Value Line’s subscription business.
  • Concentration of Revenue: A significant portion of publishing revenue is derived from a single customer, creating a concentration risk.
  • EAM Trust Growth: Continued growth in assets under management at EAM Trust can significantly boost Value Line’s income from its non-voting interests.
  • Digital Transformation: Successfully transitioning subscribers from print to digital platforms can improve efficiency and reduce costs.
  • Proprietary Rankings: The strong performance of Value Line’s proprietary rankings can be leveraged to attract new subscribers and retain existing ones.

Potential Implications

Company Performance

  • Continued reliance on EAM Trust’s performance makes Value Line’s financial results susceptible to market fluctuations and the investment decisions of EAM Trust.
  • Decline in publishing revenue may necessitate cost-cutting measures or a shift in business strategy to focus on digital offerings.
  • Increased operating expenses could impact profitability if not offset by revenue growth or improved efficiency.

Stock Price

  • Positive performance of EAM Trust and Value Line’s proprietary rankings could positively influence investor sentiment.
  • Concerns about declining publishing revenue and increased operating expenses may negatively impact the stock price.
  • Overall, the stock is recommended as a HOLD, pending further observation of subscription revenue trends and the impact of economic conditions on EAM Trust’s performance.

Value Line, Inc. – Form 10-Q Report – January 31, 2025

Executive Summary

This report analyzes Value Line, Inc.’s Form 10-Q filing for the quarter ended January 31, 2025. The company’s core business revolves around investment periodicals and related publications, along with licensing its intellectual property. Key findings include a decrease in income from operations, offset by an increase in income from its investment in EAM Trust. Overall, net income increased year-over-year. We recommend a HOLD rating, pending further observation of subscription revenue trends and the impact of economic conditions on EAM Trust’s performance.

Company Overview

Value Line, Inc. is a well-known provider of investment research and analysis. Its primary revenue streams are subscriptions to its investment periodicals and copyright fees from licensing its proprietary rankings and data. A significant portion of Value Line’s income is derived from its investment in EAM Trust, which manages the Value Line Funds. The company operates in a competitive landscape, facing challenges from free or low-cost investment information available online.

Detailed Analysis

Financial Statement Analysis

Key Ratios and Trends

Ratio January 31, 2025 January 31, 2024 Change Analysis
Gross Profit Margin 72.7% 75.6% -2.9% Slight decrease in profitability from publishing operations.
Operating Margin 17.4% 24.4% -7.0% Significant decrease in operating efficiency.
Net Profit Margin 57.6% 64.4% -6.8% Decrease in overall profitability, but still strong.
Earnings Per Share (EPS) $0.55 $0.62 -11.3% Decrease in earnings per share.

Revenue: Total publishing revenues decreased by 1.8% for the three months ended January 31, 2025, and 6.3% for the nine months ended January 31, 2025, compared to the same periods in the prior year. This decline is primarily attributed to a decrease in copyright fees and a slight decrease in investment periodicals and related publications revenue.

Expenses: Operating expenses increased by 7.3% for the three months ended January 31, 2025, and 3.4% for the nine months ended January 31, 2025. The increase is mainly due to higher advertising and promotion expenses, production and distribution expenses, and office and administration expenses.

Investment Gains/Losses: Investment gains decreased significantly for the three months ended January 31, 2025, but increased significantly for the nine months ended January 31, 2025, compared to the same periods in the prior year. This fluctuation is primarily due to changes in unrealized gains/losses on equity securities.

EAM Trust: Income from Value Line’s non-voting revenues and non-voting profits interests in EAM Trust increased significantly, offsetting the decline in income from operations. This highlights the importance of EAM Trust to Value Line’s overall profitability.

Management’s Discussion and Analysis (MD&A) Insights

Management acknowledges the challenging stock market environment and its impact on subscription sales. They are actively pursuing strategies to attract new subscribers through various marketing channels. The MD&A also highlights the importance of EAM Trust and the performance of the Value Line Funds.

Red Flags

  • Decline in Publishing Revenue: The decrease in publishing revenue, particularly copyright fees, is a concern and warrants close monitoring.
  • Increased Operating Expenses: The increase in operating expenses, especially advertising and promotion, needs to be evaluated for its effectiveness in generating revenue.

Uncommon Metrics

The filing highlights the performance of the Value Line Proprietary Ranks, with “Rank 1 & 2” stocks outperforming the Russell 2000 Index. This metric is crucial for attracting and retaining subscribers who rely on Value Line’s rankings for investment decisions.

Risk and Opportunity Assessment

Risks

  • Market Volatility: Fluctuations in the stock market can impact subscription sales and the performance of EAM Trust, affecting Value Line’s revenue and profitability.
  • Competition: The availability of free or low-cost investment information online poses a significant threat to Value Line’s subscription business.
  • Concentration of Revenue: A significant portion of publishing revenue is derived from a single customer, creating a concentration risk.

Opportunities

  • EAM Trust Growth: Continued growth in assets under management at EAM Trust can significantly boost Value Line’s income from its non-voting interests.
  • Digital Transformation: Successfully transitioning subscribers from print to digital platforms can improve efficiency and reduce costs.
  • Proprietary Rankings: The strong performance of Value Line’s proprietary rankings can be leveraged to attract new subscribers and retain existing ones.

Conclusion and Actionable Insights

Value Line, Inc. demonstrated resilience in a challenging market environment, with increased net income driven by its investment in EAM Trust. However, the decline in publishing revenue and increased operating expenses are areas of concern. The company’s reliance on EAM Trust for a significant portion of its income also presents a risk. We recommend a HOLD rating. Investors should monitor subscription revenue trends, the effectiveness of marketing initiatives, and the performance of EAM Trust in future periods.

1. Commentary

Value Line’s financial performance shows mixed results for the nine months ended January 31, 2025. While net income and EPS increased compared to the same period last year, driven by higher revenues and profits from its investment in EAM Trust and investment gains, income from operations decreased. The company maintains a strong liquidity position with a substantial amount of cash and investments. Revenue from investment periodicals decreased slightly, while copyright fees decreased significantly.

2. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Metric: Since cost of revenue is not explicitly stated, we will assume total expenses are equivalent to cost of revenue. For the three months ended January 31, 2025: (8,967 – 7,403) / 8,967 = 17.44%. For the three months ended January 31, 2024: (9,131 – 6,899) / 9,131 = 24.44%. For the nine months ended January 31, 2025: (26,692 – 21,537) / 26,692 = 19.32%. For the nine months ended January 31, 2024: (28,484 – 20,831) / 28,484 = 26.87%.
    • Trend: The gross profit margin decreased for both the three-month and nine-month periods, indicating a lower percentage of revenue remaining after covering production costs.
    • Industry: The average gross profit margin for the publishing industry typically ranges from 40% to 60%. Value Line’s gross profit margin is significantly lower than the industry average, suggesting higher relative operating expenses.
  • Operating Profit Margin

    • Metric: For the three months ended January 31, 2025: 1,564 / 8,967 = 17.44%. For the three months ended January 31, 2024: 2,232 / 9,131 = 24.44%. For the nine months ended January 31, 2025: 5,155 / 26,692 = 19.31%. For the nine months ended January 31, 2024: 7,653 / 28,484 = 26.87%.
    • Trend: The operating profit margin decreased for both the three-month and nine-month periods, indicating a lower percentage of revenue remaining after covering operating expenses.
    • Industry: The average operating profit margin for the publishing industry typically ranges from 15% to 20%. Value Line’s operating profit margin is within the industry average.
  • Net Profit Margin

    • Metric: For the three months ended January 31, 2025: 5,163 / 8,967 = 57.58%. For the three months ended January 31, 2024: 5,885 / 9,131 = 64.45%. For the nine months ended January 31, 2025: 16,735 / 26,692 = 62.69%. For the nine months ended January 31, 2024: 14,232 / 28,484 = 49.97%.
    • Trend: The net profit margin decreased for the three-month period but increased for the nine-month period.
    • Industry: The average net profit margin for the publishing industry typically ranges from 5% to 15%. Value Line’s net profit margin is significantly higher than the industry average, indicating efficient cost management and/or significant non-operating income.
  • Return on Assets (ROA)

    • Metric: Using net income for the nine months ended January 31, 2025, and average total assets: 16,735 / ((143,555 + 136,035) / 2) = 11.98%.
    • Industry: The average ROA for the financial services sector is around 1-2%. Value Line’s ROA is significantly higher, indicating efficient asset utilization.
  • Return on Equity (ROE)

    • Metric: Using net income for the nine months ended January 31, 2025, and average total equity: 16,735 / ((98,950 + 90,793) / 2) = 17.68%.
    • Industry: The average ROE for the financial services sector is around 10-12%. Value Line’s ROE is higher, indicating good profitability relative to shareholder equity.
  • Earnings Per Share (EPS) – Basic and Diluted

    • Metric: For the three months ended January 31, 2025: $0.55. For the three months ended January 31, 2024: $0.62. For the nine months ended January 31, 2025: $1.78. For the nine months ended January 31, 2024: $1.51.
    • Trend: EPS decreased for the three-month period but increased for the nine-month period.
    • Industry: N/A – EPS is company-specific.

Liquidity

  • Current Ratio

    • Metric: January 31, 2025: 78,296 / 22,813 = 3.43. April 30, 2024: 71,024 / 22,254 = 3.19.
    • Trend: The current ratio increased, indicating improved short-term liquidity.
    • Industry: A current ratio of 1.5 to 2.0 is generally considered healthy. Value Line’s current ratio is well above this range, suggesting a very strong liquidity position.
  • Quick Ratio (Acid-Test Ratio)

    • Metric: Assuming that “Prepaid expenses and other current assets” are the least liquid assets. January 31, 2025: (78,296 – 869) / 22,813 = 3.39. April 30, 2024: (71,024 – 1,160) / 22,254 = 3.14.
    • Trend: The quick ratio increased, indicating improved short-term liquidity.
    • Industry: A quick ratio of 1.0 or greater is generally considered healthy. Value Line’s quick ratio is well above this range, suggesting a very strong liquidity position.
  • Cash Ratio

    • Metric: January 31, 2025: 26,816 / 22,813 = 1.18. April 30, 2024: 4,390 / 22,254 = 0.20.
    • Trend: The cash ratio increased significantly, indicating a much stronger ability to cover current liabilities with cash and cash equivalents.
    • Industry: A cash ratio of 0.5 or greater is generally considered healthy. Value Line’s cash ratio is above this range, suggesting a very strong liquidity position.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Metric: January 31, 2025: 44,605 / 98,950 = 0.45. April 30, 2024: 45,242 / 90,793 = 0.50.
    • Trend: The debt-to-equity ratio decreased, indicating a slightly lower level of financial leverage.
    • Industry: A debt-to-equity ratio of 1.0 or less is generally considered healthy. Value Line’s debt-to-equity ratio is below this range, suggesting a conservative capital structure.
  • Debt-to-Assets Ratio

    • Metric: January 31, 2025: 44,605 / 143,555 = 0.31. April 30, 2024: 45,242 / 136,035 = 0.33.
    • Trend: The debt-to-assets ratio decreased, indicating a slightly lower proportion of assets financed by debt.
    • Industry: A debt-to-assets ratio of 0.5 or less is generally considered healthy. Value Line’s debt-to-assets ratio is below this range, suggesting a conservative capital structure.
  • Interest Coverage Ratio (Times Interest Earned)

    • Metric: Interest expense is not explicitly stated. Therefore, this ratio cannot be accurately calculated.

Activity/Efficiency

  • Inventory Turnover

    • Metric: Not applicable, as the company is not primarily engaged in retail or manufacturing.
  • Days Sales Outstanding (DSO)

    • Metric: For the nine months ended January 31, 2025: (1,336 / (26,692/ (365/4))) = 18.26 days. For the nine months ended January 31, 2024: (1,310 / (28,484/ (365/4))) = 16.75 days.
    • Trend: DSO increased, indicating that it takes slightly longer to collect receivables.
    • Industry: The average DSO for the publishing industry is around 30-45 days. Value Line’s DSO is lower, indicating efficient collection practices.
  • Days Payable Outstanding (DPO)

    • Metric: For the nine months ended January 31, 2025: (1,097 / (21,537/ (365/4))) = 7.40 days. For the nine months ended January 31, 2024: (1,430 / (20,831/ (365/4))) = 9.99 days.
    • Trend: DPO decreased, indicating that the company is paying its suppliers more quickly.
    • Industry: The average DPO varies widely by industry. A lower DPO could indicate that the company is not taking full advantage of available credit terms.
  • Asset Turnover

    • Metric: For the nine months ended January 31, 2025: 26,692 / ((143,555 + 136,035) / 2) = 0.19.
    • Industry: The average asset turnover for the financial services sector is around 0.2-0.5. Value Line’s asset turnover is lower, indicating less efficient asset utilization.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Metric: The nine-month EPS is $1.78. To estimate the annual EPS, we can multiply this by 4/3: $1.78 * (4/3) = $2.37. The current stock price is $39.60. Therefore, the P/E ratio is 39.60 / 2.37 = 16.71.
    • Industry: The average P/E ratio for the financial services sector is around 15-20. Value Line’s P/E ratio is within this range.
  • Price-to-Book Ratio (P/B)

    • Metric: Book value per share = 98,950 / 9,413,562 = $10.51. P/B ratio = 39.60 / 10.51 = 3.77.
    • Industry: The average P/B ratio for the financial services sector is around 1-3. Value Line’s P/B ratio is higher, suggesting that the market values the company’s assets at a premium.
  • Price-to-Sales Ratio (P/S)

    • Metric: Annualized revenue = 26,692 * (4/3) = 35,589.33. Market cap = 9,413,562 * 39.60 = 372,777,031.20. P/S ratio = 372,777,031.20 / 35,589,333.33 = 10.48.
    • Industry: The average P/S ratio for the publishing industry is around 1-3. Value Line’s P/S ratio is higher, suggesting that the market values the company’s sales at a premium.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: Market cap = 372,777,031.20. Total debt = 44,605,000. Cash and cash equivalents = 26,816,000. Enterprise Value (EV) = 372,777,031.20 + 44,605,000 – 26,816,000 = 390,566,031.20. EBITDA = Income from operations + Depreciation and Amortization = 5,155,000 + 959,000 = 6,114,000. Annualized EBITDA = 6,114,000 * (4/3) = 8,152,000. EV/EBITDA = 390,566,031.20 / 8,152,000 = 47.91.
    • Industry: The average EV/EBITDA for the financial services sector is around 10-15. Value Line’s EV/EBITDA is significantly higher, suggesting that the company may be overvalued.

Growth Rates

  • Revenue Growth

    • Metric: For the nine months ended January 31, 2025 compared to the nine months ended January 31, 2024: (26,692 – 28,484) / 28,484 = -6.29%.
    • Trend: Revenue decreased.
  • Net Income Growth

    • Metric: For the nine months ended January 31, 2025 compared to the nine months ended January 31, 2024: (16,735 – 14,232) / 14,232 = 17.58%.
    • Trend: Net income increased.
  • EPS Growth

    • Metric: For the nine months ended January 31, 2025 compared to the nine months ended January 31, 2024: (1.78 – 1.51) / 1.51 = 17.88%.
    • Trend: EPS increased.

Other Relevant Metrics

  • Non-voting revenues and non-voting profits interests from EAM Trust

    • Description: These represent Value Line’s share of the revenues and profits generated by EULAV Asset Management (EAM) Trust, in which Value Line holds a non-voting interest. EAM Trust serves as the investment advisor to the Value Line Funds.
    • Calculation: These figures are directly reported in the income statement.
    • Significance: This is a key performance indicator for Value Line, as a significant portion of its income is derived from its relationship with EAM Trust. Fluctuations in EAM’s assets under management (AUM) and profitability directly impact Value Line’s earnings.
    • Trend: For the three months ended January 31, 2025, the non-voting revenues and non-voting profits interests from EAM Trust increased by 40.7% compared to the same period in 2024. For the nine months ended January 31, 2025, this metric increased by 47.5% compared to the same period in 2024. This indicates a strong performance by EAM Trust.
  • Unearned Subscription Revenue

    • Description: Represents the revenue that Value Line has received for subscriptions but has not yet recognized as earned revenue.
    • Significance: This is a key indicator of future revenue.
    • Trend: Unearned subscription revenue decreased slightly from $22,497 (January 31, 2024) to $21,942 (January 31, 2025).

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️