AAPL 182.3 0.4076% MSFT 401.4 -0.3451% GOOG 143.835 1.1498% GOOGL 142.58 1.0346% AMZN 168.63 0.9277% NVDA 674.72 -2.8509% META 468.03 -0.7886% TSLA 194.6018 0.4345% TSM 125.34 0.008% LLY 745.91 -1.2903% V 276.76 0.5851% AVGO 1225.9 -0.053% JPM 180.9 0.651% UNH 521.78 0.1382% NVO 120.93 -0.4282% WMT 173.7 -1.2282% LVMUY 179.1 0.8332% XOM 104.85 2.0438% LVMHF 893.764 0.5925% MA 459.05 1.6159%

small-cap

Make a Wager on These Beaten Down Small-Cap Stocks - STRA, TNK

Feb 04, 2022 | Team Kalkine
Make a Wager on These Beaten Down Small-Cap Stocks - STRA, TNK

Strategic Education, Inc.

STRA Details

Strategic Education, Inc. (NASDAQ: STRA) is a holding company for educational services that provides post-secondary education and other academic programs to students on campus and online to enable personalized learning. STRA operates through three segments: 1) US Higher Education (USHE), which offers certificate and degree programs to working adults through Strayer University and Capella University; 2) Australia/New Zealand, which offers certificate and degree programs through Torrens University in Australia and Media Design School in New Zealand; and 3) Alternative Learning, which focuses on developing and maintaining relationships with large organizations to develop programs that provide employees with skill-based training.

Latest News:

  • Advancing FlexPath Portfolio: On December 06, 2021, STRA announced that Capella University is adding a Doctor of Education (EdD) in Educational Leadership to its FlexPath competency-based, direct assessment learning model. The EdD in Educational Leadership in FlexPath format comes months after Capella University's Doctor of Business Administration (DBA) in FlexPath format and a little over a year after its Doctor of Nursing Practice (DNP) in FlexPath format were both launched.

Q3FY21 Results:

  • Solid growth in Topline: The company reported a YoY increase of 12.99% in revenue to USD 270.08 million in Q3FY21 (ended September 30, 2021) from USD 239.03 million in Q3FY20, attributable to primarily due to acquisition of Australia/New Zealand from Laureate Education, Inc. in November 2020 partially offset by the USHE segment.
  • Reduction in Profitability: In Q3FY21, STRA's net income dropped to USD 3.85 million from USD 10.96 million in Q3FY20.
  • Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 277.41 million and total debt of USD 141.59 million.
  • Dividend Declaration: On November 04, 2021, the company declared a quarterly dividend of USD 0.60 per common share, paid on December 06, 2021, to shareholders of record on November 29, 2021.

Key Risk:

  • Dependence on Title IV programs: In FY20, Strayer University and Capella University derived 82.95% and 71.98% of their revenues, respectively, from Title IV programs. STRA is mandated to comply with the comprehensive Title IV program regulatory requirements set by the Department of Education (DOE), which prohibits proprietary institutions that derive more than 90% of their total revenue from Title IV Programs for two consecutive fiscal years from participating in Title IV programs for the next two years. This can lead to loss of program funding and could adversely impact the company's financials.

Valuation Methodology: EV/Sales 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:

STRA's stock price has declined 24.38% in the past nine months and is currently leaning towards the lower band of its 52-week range of USD 52.67 to USD 96.73. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 71.65.

Considering the significant correction in the stock price in the past nine months, strong balance sheet, regular dividend payment, expansion of FlexPath Portfolio, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 58.46, up 0.95%, as of February 04, 2022, at 11:40 AM ET.

Three-Year Technical Price Chart (February 04, 2022, 11:40 AM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary: