South American education stock Afya is in a cup base, creeping toward a buy point. This industry leader is today's IBD 50 Stocks to Watch pick as it hits a relative strength high on the weekly chart.
Brazil's Afya was added to Leaderboard's IBD Sector Leaders list on Dec. 30.
AFYA stock holds the top spot out of 42 stocks in the Consumer Services-Education industry group, which is ranked a respectable 26th out of the 197 IBD groups.
This medical-education specialist focuses on residency prep courses and continuing education for nearly 18,000 medical students and 265,000 active digital services users. In addition, it provides digital health services that feature clinical decisions software, electronic medical records, telemedicine and digital prescriptions.
The Afya Participacoes unit completed the acquisition of a medical school on Jan. 2, adding 340 seats (online and physical student seats) and bringing total seats to 3,163. This will provide resources for over 22,000 medical students at maturity, up from the current 18,000 or so. The acquisition also puts Afya into a new state in the Brazilian northeast.
Education Stock Eyes Buy Point In Newly-Formed Base
The education stock came public price in the 20s in July 2019 and trended lower into July 2022. It is now grinding through a cup base with a buy point of 17.12. The base emerged after the stock broke out from a deep cup-with-handle base, hitting the 15.41 buy point in above average volume on Nov. 3.
Shares dropped over 7% after Afya reported Q3 earnings on Nov. 21, even though management reiterated its 2022 outlook. It recovered most of those losses the next day and shares have slowly trended higher in the last six weeks.
On Wednesday, the stock dipped and then bounced off its 50-day moving average, rebounding to find support at its 21-day exponential moving average.
It just hit a new high on the relative strength line, as indicated by the blue dot on the MarketSmith weekly chart. The high 95 Relative Strength Rating has been climbing steadily, up from 93 four weeks ago. AFYA is about 8% off its 52-week high, but up almost 80% from its low in July.
Higher Profits Forecast For 2023
Quarterly sales growth for this education stock decelerated in the last two quarters, following a robust March quarter, but are still growing at a double-digit pace year over year.
Earnings per share have tracked a similar trajectory, with 16 cents in the September quarter, 25 cents in June and 39 cents in March. However, they have grown double digit percentages year over year in each of those quarters.
Full-year earnings are projected to grow to 98 cents per share in 2022 from 63 cents in 2021, a 55% increase. Analysts currently forecast 17% growth to $1.15 per share in 2023.
Mutual fund ownership ticked up to 123 funds in December, from 115 in September.
