As the prospects of the education sector continue to evolve, thanks to the increasing internet penetration and new technological innovations, companies that can capitalize on them could witness considerable growth in the long run.
To that end, investors could consider fundamentally strong education stocks Adtalem Global Education Inc. (ATGE), Perdoceo Education Corporation (PRDO), and Franklin Covey Co. (FC) that are Buy-rated in our proprietary rating system.
Outsourcing education services refers to educational institutions partnering with external providers or contractors to manage aspects of their administrative or educational needs. With innovation and technology playing an indispensable role in the delivery of education today, outsourcing could provide more efficient, professional, and cost-effective services.
Moreover, the rise of artificial intelligence (AI) has created new opportunities for education providers to reach students in new and innovative ways. For example, by analyzing large amounts of data, generative AI can enhance the learning process by understanding students’ needs, preferences, and learning patterns.
The global education technology market is expected to expand at a compound annual growth rate (CAGR) of 13.6% by 2030
Given these factors, investing in featured education stocks could be profitable. Let’s take a closer look at their fundamentals.
Adtalem Global Education Inc. (ATGE)
ATGE provides workforce solutions worldwide. It operates through three segments, Chamberlain, Walden, and Medical and Veterinary.
In terms of the trailing-12-month EBIT margin, ATGE’s 16.01% is 117.4% higher than the 7.36% industry average. Its 13.44% trailing-12-month levered FCF margin is 302.1% higher than the 3.34% industry average. Likewise, its 55.51% trailing-12-month gross profit margin is 57.5% higher than the industry average of 35.24%.
For the third quarter ended March 31, 2023, ATGE’s revenue increased 1.3% year-over-year to $369.08 million. The company’s operating income increased 80.4% from the prior-year period to $59.43 million. Its income from continuing operations increased 1003.7% year-over-year to $48.56 million. Also, its total EPS came in at $1.00.
ATGE’s EPS for the quarter ending September 30, 2023, is expected to increase 3.4% year-over-year to $0.91. Its revenue for the quarter ending December 31, 2023, is expected to increase 1.1% year-over-year to $367.39 million. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 21% to close the last trading session at $41.26.
ATGE’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the B-rated Outsourcing - Education Services industry, it is ranked #2 out of 20 stocks. The stock has a B grade for Growth, Value, Momentum, and Quality.
Click here to see the additional ratings of ATGE for Stability and Sentiment.
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.
In terms of the trailing-12-month EBIT margin, PRDO’s 18.77% is 154.9% higher than the 7.36% industry average. Its 15.85% trailing-12-month levered FCF margin is 374.4% higher than the 3.34% industry average. Likewise, its 13.88% trailing-12-month net income margin is 224.7% higher than the industry average of 4.28%.
PRDO’s total revenue for the first quarter ended March 31, 2023, increased 6.9% year-over-year to $195.60 million. The company’s adjusted operating income increased 4.3% year-over-year to $53.11 million. Its net income increased 17.6% year-over-year to $34.48 million. Additionally, its adjusted EPS increased 16% year-over-year to $0.58.
PRDO’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 23.8% and 7% year-over-year to $0.52 and $179.42 million, respectively. The company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 11.8% year-to-date to close the last trading session at $12.04.
It is no surprise that PRDO has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It is ranked #1 in the same industry. The stock has an A grade for Value and Quality and a B for Momentum and Stability.
To see the additional ratings of PRDO for Growth and Sentiment, click here.
Franklin Covey Co. (FC)
FC provides training and consulting services in the areas of execution, sales performance, productivity, customer loyalty, and educational improvement for organizations and individuals worldwide. The company operates through three segments: Direct Offices; International Licensees; and Education Practice.
In terms of the trailing-12-month gross profit margin, FC’s 76.11% is 155% higher than the 29.85% industry average. Its 10.55% trailing-12-month levered FCF margin is 102.5% higher than the 5.21% industry average. Likewise, its 13.15% trailing-12-month Return on Total Capital is 88.7% higher than the industry average of 6.97%.
FC’s net sales for the second quarter ended February 28, 2023, increased 9.1% year-over-year to $61.76 million. Its gross profit increased 7% year-over-year to $47.21 million. Moreover, its adjusted EBITDA increased 1.8% year-over-year to $8.19 million.
FC’s EPS for the quarter ending August 31, 2023, is expected to increase 14.7% year-over-year to $0.45. Its revenue for the quarter ending May 31, 2023, is expected to increase 5.2% year-over-year to $69.6 million. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past month, the stock has gained 2.8% to close the last trading session at $36.63.
FC’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #6 in the Outsourcing - Education Services industry. It has an A grade for Quality and a B for Momentum and Sentiment. We have also given FC grades for Growth, Value, and Stability. Get all FC ratings here.
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ATGE shares were trading at $42.43 per share on Tuesday morning, up $1.17 (+2.84%). Year-to-date, ATGE has gained 19.52%, versus a 12.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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