McGraw-Hill Education a unit of The McGraw-Hill Companies Inc. (MHP), recently purchased Bookette Software, a privately held company producing software for the expansion, supervision and scoring of online course assessment. The financial terms of the deal were not disclosed.
Monterey, California based Bookette, which will join CTB/McGraw-Hill, provides smart-scoring software, used for reviewing scholar’s scripted answers in large number, thus simplifying evaluations and reducing the load of scoring while generating positive responses to the students. The company also offers high-end online courses for tutor training and test delivery.
The acquisition is aimed at escalating the digital capabilities of McGraw-Hill in an era, where companies are focusing more on novelty and technology in education to meet the ever increasing demand for online testing in the classroom.
Moreover, as the federal and state governments toil to implement a general evaluation structure for the K-12 segment, the demand for companies providing cutting-edge technologies in education is expected to rise significantly.
The McGraw-Hill Education segment is one of the leading global educational publishers. The segment comprises of two operating groups: the School Education Group (SEG) serving the elementary and high school (elhi) markets; and the Higher Education, Professional and International (HPI) Group serving the college, professional, international, and adult education markets. The segment publishes textbooks for schools, colleges, and professional purposes worldwide.
During fiscal 2010, the company’s higher education and professional segment was buoyed by strong growth registered across digital products and services, and the increase in demand for online study tools (e.g. McGraw-Hill Connect series, McGraw-Hill Create) powered by higher enrollment in the U.S. academic institutions. However, quarterly results were dampened by a sales decline registered in December 2010 in the U.S. college as well as in international markets.
However, McGraw-Hill’s results could be negatively affected by lower volume of debt securities issued in the capital markets. The financial distress of the recent kind could either dent investor’s demand for debt securities or make issuers reluctant to issue such securities. In addition, increase in interest rates or credit spreads, may also adversely affect the general level of debt issuance.
Currently, we have a long-term ‘Neutral’ rating on McGraw-Hill, which competes with Pearson plc (PSO). Moreover, the company holds a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.
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