2301 Gakujo

Gakujo sells job ads and career fairs to companies hiring people in their 20s. Companies are short of workers, but Gakujo cut its profit forecast twice this fiscal year.

▲ Orders from employers rose 11% in the first half. The hopeful view: demand is fine, and the forecast cuts came from timing, not lost customers.  ▼ Two forecast cuts in one year is a pattern. Revenue from the main Re-shukatsu site fell 7%, and the number of young job-seekers shrinks every year.

Re-shukatsu is the best-known job-change service for people in their 20s, with 2.8 million members. But profit margins fell from about 25% to 21% as the company spent more on promotion.

▲ The brand leads its niche, membership is large, and the company still keeps 21 yen of every 100 yen of sales as profit while investing.  ▼ The extra spending on ads and systems has not made sales grow faster. Recruit, Mynavi, and BizReach all sell to the same young job-seekers.

The founding Nakai family holds about 17% of shares. Cash and securities of ¥11.3bn equal about half the company's market value. Dividends have risen six years in a row.

▲ Gakujo pays out half its profit as dividends, has raised them six straight years, and announced a share buyback the same day it cut its forecast.  ▼ The cash pile keeps growing. With family control and a big block of treasury shares, no outside investor can make the company pay the cash out.

The business sells for 5.4 years of operating profit. Its capital earns 15.4%. Net cash is 31.8% of the market cap; 50.4% of profit goes out as dividends. Today's dividend yield is 4.9%. If the company paid out all of its profit, the yield at today's price would be 9.7% — past the 6% level where Japanese small caps tend to find buyers. Raising the payout 10 points a year would reach 6% in about 1.2 years. At the current payout, the cash pile alone equals today's market cap in about 14.1 years. How this valuation floor works →