PagSeguro Digital Ltd.

PAGS Details

PagSeguro Digital Ltd. (NYSE: PAGS) is a Brazilian company that provides financial technology solutions to Micro-Merchants, Small Businesses, and Medium-Sized Businesses (SMEs). In addition, PAGS  offers various services, including cash-in and cash-out options, access to working capital, and assistance with cash flow management.

Latest News:

• Transition in Leadership: PAGS announced the appointment of Mr. Alexandre Magnani as its Chief Operating Officer (COO) on October 08, 2021. He had been the company's Director of Sales and International Financial Services from January 2015 before being named COO.

Q3FY21 Results:

• Boost in Topline: In Q3FY21 (ended September 30, 2021), the company reported a 47.87% increase in revenue from transaction activities and other services to BRL 1.79 billion, compared to BRL 1.21 billion in Q3FY20, owing to 22.2% and 49.1% growth in active merchant base and acquiring Total Payment Volume (TPV), respectively.
• Surge in TPV: PAGS Consolidated TPV increased by 85.78% year on year in Q3FY21, to BRL 125.5 billion from BRL 67.59 billion in Q3FY20.
• Expansion in Bottomline: In Q3FY21, net income increased by 22.06% YoY to BRL 321.5 million, up from BRL 263.4 million in Q3FY20.
• Progress in Active Merchants: PAGS witnessed an increase in active merchants to 7.7 million in Q3FY21 from 6.3 million in Q3FY20.

Key Risks:

• Dependence on Third Parties: Facilities, infrastructure, components, and services, such as data center facilities and cloud computing, are provided by third parties to the company. If these third parties fail to deliver, PAGS' operations may be disrupted, resulting in customer dissatisfaction and, eventually, harming its operations.
• Supplier Concentration Risk: For some of the significant manufacturing equipment necessary for producing POS devices, PAGS relies on a small number of suppliers. In addition, the majority of its POS devices are assembled and tested by a single vendor. As a result, any breach of contract by vendors could jeopardize the company's operations.

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.

PAGS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

PAGS' stock price has fallen 56.50% in the past three months and made a fresh 52-week low today. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 26.97, indicating an oversold zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 32.68.

Considering the significant correction in the stock price in the past three months, strong top-line and bottom-line performance, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 26.23, down 2.31% as of November 29, 2021, 1:04 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

American Public Education, Inc.

APEI Details

American Public Education, Inc. (NASDAQ: APEI) provides online and on-campus postsecondary education to ~107,800 students via its three subsidiary institutions, namely American Public University System, Inc. (APUS), Rasmussen University (RU) National Education Seminars, Inc. (also known as Hondros College of Nursing - HCN). APEI derives its revenue from course registrations and enrollments, instruction services, tuition, and other fees. As of November 29, 2021, the company's market capitalization stood at USD 397.57 million.

Latest News:

• Key Collaboration: On October 20, 2021, APUS partnered with the California Community Colleges Chancellor's Office that allows graduates of California's Associate Degree for Transfer (ADT) programs from 116 community colleges to transfer to APUS as a junior with no loss of credit. In addition, these students can earn their bachelor's degree online through one of 38 academic programs at APUS's American Military University and American Public University.
• Reaffirmation of Accreditation: On October 11, 2021, The Higher Learning Commission (HLC) has reaccredited the APUS for another ten years, with the next reaffirmation set for 2030–2031. The reaccreditation affirms APUS's academic solid standards in delivering online higher education to students from all walks of life and admitting the university to the Open Pathway, which is designated for institutions that have been recognized for more than ten years.

Q3FY21 Results:

• Growth in Topline: The company reported a YoY growth of 24.16% in revenues to USD 98.25 million in Q3FY21 (ended September 30, 2021) compared to USD 79.13 million in Q3FY20, driven by the acquisition of Rasmussen University.
• Decline in Profitability: APEI reported a net loss of USD 0.27 million in Q3FY21 vs. a net income of USD 2.64 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents of USD 141.49 million and total debt of USD 162.09 million.

Key Risk:

• Dependence on Tuition Assistance: Tuition Assistance (TA) is available to members of the US Armed Forces based on their branch of service. Students enrolled in TA accounted for 43% of APUS' adjusted net course registrations in FY20. As a result, any reduction or suspension of TA to APUS by the Department of Defense (DoD) could have a negative impact on the company's financials.

Outlook:

Operational and Financial Outlook (Source: Company Presentation, Q3FY21)

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.

APEI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

APEI's share price has declined 37.81% in the past twelve months and made a fresh 52 week low today. The stock is currently trading far below its 50 and 200 DMA levels, and its RSI Index is at 17.26, indicating an oversold zone. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 24.13.

Considering the significant correction in the stock price in the past twelve months, strong top line performance, a recent acquisitions and collaborations, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 19.42, down 8.61% as of November 29, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.