As the education sector continues to evolve owing to rapid technological innovations, a growing population, and a rising number of internet users, education platforms able to cash in on these opportunities could witness significant growth.
To that end, investors could buy education stocks Adtalem Global Education Inc. (ATGE) and Franklin Covey Co. (FC). On the other hand, considering the market turbulence, fundamentally weak Coursera, Inc. (COUR) could stay under pressure and be best sold off.
Education is becoming increasingly globalized, with institutions establishing international partnerships and campuses. When educational institutions partner with external providers or contractors to manage aspects of administration or education, it is referred to as outsourcing education services.
Outsourcing aids in delivering education by providing more efficient, professional, and cost-effective services.
Moreover, amid the rise of artificial intelligence (AI), there has been a transformation in the education sector as education providers have innovations and opportunities to interact with students. The global education technology market is expected to expand at a CAGR of 13.6% until 2030.
Let’s take a closer look at the fundamentals of the featured stocks.
Stocks to Buy:
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 118.5% higher than the 7.33% industry average. Its 13.44% trailing-12-month levered FCF margin is 274.5% higher than the 3.59% industry average. Likewise, its 55.51% trailing-12-month gross profit margin is 57.9% higher than the industry average of 35.15%.
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 significantly year-over-year to $48.56 million. Also, its total EPS came in at $1.00.
ATGE’s EPS and revenue for the quarter ending September 30, 2023, are expected to increase 3.4% and 0.2% year-over-year to $0.91 and $355.11 million, respectively. Over the past year, the stock has gained 29.7% to close the last trading session at $40.58.
ATGE’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 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 21 stocks. The stock has a B grade for Growth, Value, and Quality.
Click here to see the additional ratings of ATGE for Momentum, Stability, and Sentiment.
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 155.1% higher than the 29.83% 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 year, the stock has gained 1.8% to close the last trading session at $35.39.
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 same industry. It has an A grade for Quality and a B for Sentiment. We have also given FC grades for Growth, Value, Momentum, and Stability. Get all FC ratings here.
Stock to Sell:
Coursera, Inc. (COUR)
COUR operates an online educational content platform that connects learners, educators, organizations, and institutions. It offers online courses that include data science, business, computer science, physical science and engineering, language learning, information technology, and health, among others.
In terms of trailing-12-month EBIT margin, COUR’s negative 31.05% compares to the industry average of 7.33%. Its trailing-12-month net income margin of negative 30.76% compares to the industry average of 4.28%. Likewise, its 0.58x trailing-12-month asset turnover ratio is 42.7% lower than the 1.01x industry average.
COUR’s non-GAAP net loss for the first quarter that ended March 31, 2023, narrowed 66.2% year-year-over-year to $5.16 billion. Its adjusted EBITDA narrowed 28.6% year-over-year to $7.53 billion. Additionally, it’s net loss per share narrowed by 18.5% year-over-year to $0.22.
COUR’s EPS for the quarter ending June 30, 2023, is expected to remain negative. Over the past year, the stock has fallen 10% to close the last trading session at $13.20.
COUR’s POWR Ratings reflect weak prospects. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. It is ranked #19 in the Outsourcing - Education Services industry. It has a D grade for Value.
In total, we rate COUR on eight different levels. Beyond what we stated above, we have also given COUR grades for Growth, Momentum, Stability, Sentiment, and Quality. Click here to access all the ratings.
What To Do Next?
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ATGE shares were trading at $39.92 per share on Wednesday afternoon, down $0.66 (-1.63%). Year-to-date, ATGE has gained 12.45%, versus a 15.00% 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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