Perdoceo Education Corporation

PRDO Details

Perdoceo Education Corporation (NASDAQ: PRDO) provides online post-secondary education as well as campus-based and blended learning programs to a diverse student population. The Colorado Technical University (CTU) and the American InterContinental University System (AIU) are two of the company's accredited institutions, both of which offer master's, and doctoral degree programs, and associate and bachelor's degree programs. Tuition, technology, graduation fees, contract training, and bookstore sales all contribute to PRDO's top-line. As of July 28, 2021, the company’s market capitalization stood at USD 800.90 million.

FY20 Student Enrollment Mix (Source: Investor Presentation, March 22, 2021)

Q1FY21 Results: The company reported a 7.39% rise in net revenue to USD 183.64 million in Q1FY21 (ended March 31, 2021) compared to USD 170.99 million in Q1FY20, primarily due to an increase in the number of total student enrollments. In addition, the company reported an increase in net income to USD 30.75 million in Q1FY21 vs. USD 29.11 million in Q1FY20. As of March 31, 2021, the company had cash and cash equivalents (including short-term investments) of USD 447.02 million with no outstanding debt. Total student enrollments increased by 9.70% to 44,100 as of Q1FY21 vs. 40,200 as of Q1FY20.

Key Risks: Title IV programs, which aid students in funding their education, comprise a significant portion of the company's income and cash flows. During FY20, about 74% of PRDO's students participated in Title IV programs. As a result, any reduction in the program financing or the students' ability to participate in the program might significantly impact the company's enrollments, revenue, and profitability levels.

Q2FY21 & FY21 Outlook (Source: Q1FY21 Press Release, May 06, 2021)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E 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 stock declined by 27.39% in the past 12 months and is currently leaning towards the lower end of the 52-week range of USD 10.62 to USD 16.89. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 45.75. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 14.29. Considering the company’s growth prospects, increasing need for online education, strong balance sheet, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 11.72, up by 3.08% as of July 28, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

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

U.S. Xpress Enterprises, Inc.

USX Details

U.S. Xpress Enterprises, Inc. (NYSE: USX) is one of the nation's major asset-based freight carriers, providing various services through its own truckload fleet. Through its non-asset-based truck brokerage system, the firm also manages third-party carriers. USX earns revenue from two segments: 1) Truckload, which provides transportation services via Over-The-Road (OTR) and dedicated type contracts, and 2) Brokerage, which generates income by brokering freight to third-party operators. During Q2FY21 (ended June 30, 2021), the company's new digital fleet, Variant, increased to 1,160 tractors and produced 15.50% of Truckload sales.

Growth in Variant Fleet-Size (Source: Earnings Call Supplement, Q2FY21)

Strategic Investments: On June 15, 2021, the firm unveiled Xpress Technologies, a new business unit in the Brokerage segment that would use technology to create a digital freight marketplace for the delivery of better services. The new technology aids in the timely delivery of goods and increases operational visibility.

6MFY21 Results: The company reported an 8.27% rise in total operating revenue to USD 925.78 million during 6MFY21 (ended June 30, 2021), compared to USD 855.04 million during 6MFY20. Revenues from Truckload, Brokerage, and fuel surcharge totaled USD 676.85, 178.33, and 70.61 million, respectively. The company reported an increase in net income to USD 21.76 million during 6MFY21 vs a loss of USD 0.20 million during 6MFY20. USX’s consolidated average revenue per tractor per week improved 6.07% to USD 3,981 during 6MFY21 from USD 3,753 during the year-ago period.

Key Risks: Each share of USX's Class B common stock has five votes, whereas each share of its Class A common stock has one vote. This concentrates voting control with some Fuller and Quinn family members who own class B shares (Max Fuller and Patrick Quinn formed the company in 1985). The ability of other shareholders to influence corporate matters is constrained by this concentration of voting power.

Outlook: As of Q2FY21, the firm aims to spend USD 130.0-150.0 million in capital expenditures in FY21 to carry out its equipment replacement strategy and maintain a roughly steady average age of the equipment. This sum could rise to fund more profitable expansion prospects. USX expects contract rates to be increased by 10-15% for FY21. Continued work on digital initiatives and the conversion of trucks from traditional OTR to Digital Fleet could enable moderate sequential increases in asset utilization in FY21. 

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.

USX Daily Technical Chart (Source: REFINITIV) 

Stock Recommendation: USX stock fell 16.10% in the past three months and is currently trading in the low-to-mid-band of the 52-week range of USD 6.18 to USD 12.33. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 41.13. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 10.24. Considering the company's market dominance, growth potential, current valuation, and significant leverage and other associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 8.39, up 2.19% as of July 28, 2021, at 01:34 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

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