Shares of Adtalem Global Education are near a record high. The company, our selection for the IBD Stock of the Day, is defying the weak stock market as it forms a well-constructed base.
Adtalem operates for-profit medical schools, including Walden University, American University of the Caribbean School of Medicine and Ross University School of Veterinary Medicine. Combined, the schools have about 90,000 students learning to become doctors, nurses and other types of health care professionals.
It is a business that is thus far not exposed to tariff risks, the vagrancies of tech stocks or the political turmoil surrounding major universities. That makes it somewhat of an oasis for stock market investors. In addition, President Donald Trump hopes to eliminate the U.S. Department of Education, which regulates for-profit schools. That's another factor driving the industry this year.
But Adtalem is a solid company in its own right. It is the leader in IBD's education services industry group, owning the highest Composite Rating of 40 companies. It also has the second best EPS Rating in the group, at 97.
The medical school's shares jumped to an all-time high on Jan. 31, when Adtalem beat analysts' expectations for the December-ended quarter.
Medical School's EPS Accelerates
Revenue climbed 14% to $447.7 million year over year, marking a moderate acceleration over the prior quarter. Earnings jumped 47% to $1.18 a share, which accelerated from gains of 33%, 33% and 39% the previous quarters.
Enrollment rose 11.6% from the December 2023 quarter to 91,264, and the medical school raised tuition 2% in some programs. Enrollment trends seem favorable, with experts concerned about a shortage of workers in the field.
Adtalem raised its guidance for the fiscal year ending in June. It forecast revenue of $1.730 billion to $1.760 billion, or 9% to 11% growth, and adjusted earnings per share of $6.10 to $6.30. That's about 21.5% to 25.5% growth over the previous year.
The company will report March-quarter results May 8 after the market close. Analysts' consensus earnings estimate is $1.66 a share, or a nearly 11% increase. The revenue estimate is $447.2 million, up 8%, according to FactSet.
Medical School Forming Solid Base
The stock is forming a cup base with a 112.44 buy point, according to MarketSurge pattern recognition. The April 9 high of 107.05 is another possible entry, and Adtalem is moving above it Wednesday in heavy volume. However, the stock market remains too risky for stock purchases.
That doesn't take anything away from Adtalem's chart setup. The relative strength line is already making new highs.
Adtalem shares lost more than half their value in the 2022 bear market. But since then, the stock has never corrected more than 31%. It's formed a series of bases and advanced from each. Yet, the current base is still not a risky late-stage pattern.
The education services industry group ranks No. 4 out of 197 industry groups. Stride is another stock in the group acting well, now in a cup base with a 145 buy point. It has highest-possible Composite and EPS Ratings.
Adtalem stock has a 21-day average true range (ATR) of 4.68%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs. In the current, unpredictable market, IBD suggests stocks with ATRs of 3% or below.
