The emergence of mobile technology and immersive reality tools provides attractive opportunities for the education sector. Moreover, online classes and E-books have boosted the industry.
Hence, I think it might be wise to invest in education stocks Adtalem Global Education Inc. (ATGE), Perdoceo Education Corporation (PRDO), and Lincoln Educational Services Corporation (LINC).
The U.S. education market is projected to gain traction in the coming years owing to the adoption of new technologies and the increase in the importance of education in the U.S.
The U.S. Education Market is anticipated to reach around $3.10 trillion by 2030, growing at a CAGR of roughly 4.2%.
Also, the emergence of mobile technology, cloud services, and immersive reality tools presents numerous opportunities for the education industry. EdTech is expected to continue leveraging technology and build complementarity with expertise across the learning ecosystem of trainers, learning consultants, universities, and coaches.
The worldwide EdTech market is anticipated to increase to approximately $230 billion by 2028.
Apart from this, the rise in the popularity of online books as well as e-books in the U.S. is likely to embellish growth over time. Moreover, the post-secondary rates of enrollment in the U.S. is also increasing.
Breakthroughs in the education system are predicted to spearhead massive growth in the education sector.
Take a look at the stocks mentioned above:
Adtalem Global Education Inc. (ATGE)
ATGE provides workforce solutions worldwide. It operates through three segments, Chamberlain; Walden; and Medical and Veterinary.
On January 9, ATGE announced a new pricing model structure, the Believe and Achieve Scholarship, to help students accomplish their educational goals by lessening the financial burden of tuition. The Believe and Achieve Scholarship are aimed to make earning a degree more affordable for newly enrolled Walden students starting with the February 2023 session.
This program underscores Walden's dedication to empowering students throughout their educational journey, paving the way for them to effect change in their careers, community, and personal lives.
ATGE’s forward EV/EBITDA of 7.27x is 21.8% lower than the industry average of 9.30x. Its forward EV/EBIT multiple of 8.74 is 31.4% lower than the industry average of 12.73.
ATGE's trailing-12-month EBITDA margin of 24.02% is 110.1% higher than the 11.43% industry average. Its trailing-12-month gross profit margin of 55.27% is 57.4% higher than the 35.11% industry average.
ATGE’s revenue came in at $363.3 million in the second quarter, which ended December 31, 2022. The company's adjusted net income increased 43.4% year-over-year to $54.19 million, while adjusted earnings per share rose 56% year-over-year to $1.17. Also, its adjusted EBITDA increased 7% year-over-year to $92.13 million.
Analysts expect ATGE’s revenue for the fiscal third quarter that ended March 2023 to be $354.47 million. The company’s EPS is expected to increase 5% year-over-year to $0.91 for the same quarter. Additionally, it has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 35.6% over the past year to close the last trading session at $40.85.
ATGE’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ATGE also has an A grade for Sentiment, Growth, and Quality. It is ranked #2 out of 21 stocks in the B-rated Outsourcing - Education Services industry.
To access additional ratings for ATGE’s Stability, Value, and Momentum, click here.
Perdoceo Education Corporation (PRDO)
PRDO provides postsecondary education through online, campus-based, and blended learning programs in the United States. The company operates in two segments, Colorado Technical University and The American InterContinental University System.
PRDO’s forward EV/EBITDA of 2.81x is 69.8% lower than the industry average of 9.30x. Its forward EV/Sales multiple of 0.58 is 47.7% lower than the industry average of 1.11.
Its trailing-12-month EBITDA margin of 21.92% is 91.7% higher than the 11.43% industry average. Its trailing-12-month net income margin of 13.79% is 211.6% higher than the 4.43% industry average.
During the fiscal fourth quarter ended December 31, 2022, PRDO’s revenue increased 10.2% year-over-year to $176.15 million. Adjusted operating income came in at $32.42 million, while its adjusted EPS came in at $0.31.
PRDO’s EPS is expected to increase 12% year-over-year to $0.56 for the fiscal first quarter that ended March 2023. The company’s revenue for the same quarter is expected to increase by 3.5% year-over-year to $189.36 million. Additionally, it has topped consensus EPS and revenue estimates in each of the trailing four quarters.
Shares of PRDO have gained 17.6% over the past six months to close the last trading session at $13.23.
PRDO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B in Value and Sentiment. Within the same industry, it is ranked first.
Beyond what is stated above, we’ve also rated PRDO for Growth, Stability, and Momentum. Get all PRDO ratings here.
Lincoln Educational Services Corporation (LINC)
LINC provides career-oriented post-secondary education services to high school graduates and working adults in the United States. The company operates in two segments: Transportation and Skilled Trades; and Healthcare and Other Professions.
On February 6, LINC and Johnson Controls International plc (JCI), the global leader for smart, healthy, and sustainable buildings, announced the launch of the Johnson Controls Academy, a six-week intensive training program focused on developing the next generation of building technicians.
The program, based at Lincoln Tech's Columbia, Maryland campus, was created to provide a pathway to employment at Johnson Controls locations throughout the United States. Johnson Controls supports the students with on-site housing and relocation packages and plans to onboard approximately 130 new technicians or more each year.
LINC’s forward EV/Sales of 0.64x is 42.3% lower than the industry average of 1.11x. Its forward P/S multiple of 0.53 is 36.5% lower than the industry average of 0.83.
Also, its trailing-12-month asset turnover ratio of 1.19x is 14.3% higher than the 1.04x industry average. Its trailing-12-month gross profit margin of 57.29% is 63.2% higher than the 35.11% industry average.
LINC's total revenue rose 4.5% year-over-year to $91.78 million in the fourth quarter that ended December 31, 2022. The company’s adjusted net income increased 20.7% year-over-year to $9.95 million, while its adjusted EBITDA increased 7.4% year-over-year to $15.66 million. Its net income per common share came in at $0.27.
Street expects LINC ’s revenue for the fiscal first quarter ended March 2023 to be $83.36 million, indicating a marginal year-over-year growth. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters.
The stock has gained 3.8% over the past month to close the last trading session at $5.77.
The stock has an overall B rating, equating to a Buy in our proprietary rating system.
LINC has an A grade for Sentiment and a B in Value and Stability. It is ranked #4 in the same industry.
Click here to see the additional POWR Ratings for LINC (Quality, Momentum, and Growth).
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ATGE shares were trading at $40.37 per share on Thursday morning, down $0.48 (-1.18%). Year-to-date, ATGE has gained 13.72%, versus a 7.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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