Perdoceo Education Corporation

PRDO Details

Perdoceo Education Corp. (NASDAQ: PRDO) provides post-secondary education to students through online, campus-based, and blended learning programs in the United States. It operates through two segments, Colorado Technical University (CTU) and American InterContinental University (AIU). PRDO was incorporated in 1994 and is headquartered in Schaumburg, Illinois.

Latest Updates:

• Leadership change: Todd Nelson was appointed as Executive Chairman of the firm on January 20, 2022, with effect from that day. As a result, Andrew Hurst was appointed to succeed Mr. Nelson as President and CEO of PRDO on the following day.

Q3FY21 Results:

• Growth in revenues: The company reported a marginal increase of 2.88% in total revenues to USD 174.0 million in Q3FY21 (ended September 30, 2021) compared to USD 169.13 million in Q3FY20,  driven by an increase of USD 5.8 million within CTU.
• Increase in Operating Income & EPS: For the third-quarter ending in September 2021, the company reported an increase in operating income by 18.04% to USD 37.9 million, whereas the adjusted operating income increased by 28.4% to USD 46.3 million. Also, the earning momentum was reflected in adjusted EPS to USD 0.45 compared to USD 0.35 in Q3FY20.

Key Risks:

• Intense competitive market & Reopening of the economy shifting to offline mode: The education industry seeing a massive turnaround, especially during COVID 19, when the whole world turned to online mode, but that got a lot many big pocket companies and tech giants to invest into online education companies. This led to the price war and shrinking profit margins. Another significant threat to this sector is the Reopening of the economy where the schools and colleges will run offline, and some of the traffic will be shifted back to classroom training. These are the two macro headwinds the education sector is facing nearby. 

Valuation Methodology: Price/Earnings Per-share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

PRDO's stock price crumbled -1.03% in the past three months, moving in a range and can take off in nearby time as the fourth quarter earning as almost here. The 50 DMA & 200 DMA as also contracting and moving in a very close tangent, which further points towards the directionless movement before the stock breakout of the range. This trade setup is decent enough to accumulate the stocks before the earnings release, as it said: to sit and ride the trend.

We have valued the stock using the Price/Earnings per share based on relative valuation methodology and arrived at a target price of USD 12.88. The current price of USD 10.54 indicates that there is enough room to play the trend and encash on the cheap valuations. The recent acquisitions and the synergies coming from them as in a perfect sweet spot, upcoming earnings, and the growing trend of upskilling as the great resignation is in the news, will help the company prop up its image and growth in the medium to long term.  

Hence, we recommend a "Speculative Buy" rating on the stock at the current price of USD 10.54, down 2.14% as of January 28, 2022, at 02:58 PM ET.

1-Year Technical Price Chart (as of January 28, 2022, at 2:58 PM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.