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:

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. 

 

Teekay Tankers Ltd. 

   

TNK Details

Teekay Tankers Ltd. (NYSE: TNK) is a worldwide maritime corporation specializing in crude oil and refined petroleum products waterborne transportation. TNK's fleet includes 49 double-hull tankers (26 Suezmax tankers, 14 Aframax tankers, and nine LR2 product tankers) and two-time chartered-in tankers. The company also owns a ship-to-ship transfer company that offers full-service lightering and lightering support activities in the US Gulf and Caribbean.

 Q3FY21 Results:

• Minor Decline in Topline: Total revenues fell 6.10% sequentially to USD 115.89 million in Q3FY21 (ended September 30, 2021) from USD 123.42 million in Q2FY21, owing principally to lower average spot tanker rates in Q3FY21 and the expiration of some fixed-rate time charter contracts.
• Decline in losses: TNK's net losses decreased to USD 52.06 million in Q3FY21 from USD 129.14 million in Q2FY20.
• Balance Sheet Highlights: As of September 30, 2021, the firm has USD 60.72 million in cash and cash equivalents, with USD 613.35 million in outstanding debt (including finance lease).

Key Risks:

• Strong Dependence of Spot Tanker Rates: In FY20 and FY19, TNK generated 74.3% and 86.8% of its net revenues from vessels operating in the spot tanker market, respectively. As a result, any decrease in the spot tanker rate could harm the company's financial status.

Outlook:

• Spot Tanker Rates Estimates: TNK stated in its Q3FY21 press release that the outlook for tanker fleet supply remains positive, as global oil consumption is expected to recover in tandem with the execution of immunization programs. Tanker fleet growth is expected to be around 2% in 2021 and 2022, with low growth in 2023 due to scrapping, which is expected to more than balance new vessel deliveries. Looking ahead, tanker supply and demand fundamentals continue to improve, leading to increased tanker fleet utilization and lower tanker pricing in the future.

Valuation Methodology: EV/EBITDA 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:

TNK's stock price has fallen 25.09% in the past three months and is currently leaning towards the lower band of its 52-week range of USD 9.89 to USD 16.09. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 13.00.

Considering the company's growth prospects, a decline in losses, encouraging tanker rates outlook, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 10.51, down 0.10% as of February 04, 2022, at 12:19 PM ET.

 

Three-Year Technical Price Chart (February 04, 2022, 12:19 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.