Perdoceo Education Corporation

PRDO Details

Perdoceo Education Corporation (NASDAQ: PRDO) provides post-secondary education through online, campus-based, and blended learning programs to a broad student population. PRDO offers master's, and doctoral degree programs, and associate and bachelor's degree programs through its two accredited institutions, the Colorado Technical University (CTU) and the American InterContinental University System (AIU). As of September 14, 2021, the company's market capitalization stood at USD 757.59 million.

Q2FY21 Results: The company reported a YoY decline of 0.28% in total revenues to USD 175.54 million in Q2FY21 (ended June 30, 2021) compared to USD 176.04 million in Q2FY20. The CTU, which accounted for 58.13% of the total revenue in Q2FY21, reported a YoY growth of 1.84%, whereas the AIU declined by 3.44% YoY. Net income for PRDO reduced to USD 26.65 million in Q2FY21 vs. USD 28.17 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 476.65 million and no outstanding debt.

Key Risks: In FY20, student enrollment from Title IV programs accounted 74% of PRDO's total enrolment, which resulted in cash receipts of ~USD 525 million. The company 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.

Outlook:

Q3FY21 & FY21 Outlook (Source: Q2FY21 Earnings Release, August 05, 2021)

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.

PRDO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: PRDO's stock price decreased 19.69% in the past three months and has breached its 52-week range of USD 10.54 to USD 14.05. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 36.34. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 12.87. Considering the correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 10.52, down 2.68% as of September 14, 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.