New York, USA – Investors in the consumer discretionary sector are facing high hurdles for FY’24. With approximately 10% weighting in the S&P 500 index, businesses in this sector must meet high investor expectations for future growth. Investors are now seeking companies in consumer-based industries with strong business models, exceptional economic characteristics, and undervalued trading positions.
One such company that has caught the attention of investors is Perdoceo Education Corporation (NASDAQ: PRDO). Operating in the postsecondary education sector, Perdoceo primarily offers online education through its accredited institutions, such as Colorado Technical University and the American InterContinental University System. The company also provides campus-based and blended learning programs. With over 4,300 employees, Perdoceo targets adult learners, with the majority of its students over the age of 30 and focusing on business, IT, and health education programs.
Despite experiencing flat sales growth during the pandemic, Perdoceo has shown resilience, posting operating income of $165 million in FY’23. The company is expected to generate pre-tax earnings of $170-$190 million in FY’24, with projected growth in EBIT and operating leverage. Additionally, trading at less than 1x EV/IC, Perdoceo presents an attractive opportunity for investors looking at its strong business economics, operational performance, and potential growth catalysts.
Perdoceo’s unique learning platforms, strong student retention rates, and stock buyback initiatives have contributed to its value proposition. With a focus on capital-light operations and high post-tax margins, the company has been able to maintain a competitive edge in the education sector. Management’s commitment to capital allocation and shareholder-friendly actions further support Perdoceo’s growth potential and intrinsic value.
Looking ahead, potential catalysts for Perdoceo’s stock price include operating leverage, growth opportunities, and capital allocation strategies. With a positive outlook for FY’24 and beyond, Perdoceo could see an 18% total shareholder return in the next 12 months, reaching an estimated value of $24 per share. Despite risks such as financial uncertainties and geopolitical factors, Perdoceo’s focus on quality earnings and value creation positions it as a buy in the current market.
In conclusion, Perdoceo Education Corporation’s solid fundamentals, attractive valuation, and potential for future growth make it an intriguing investment opportunity for investors seeking exposure to the education sector. With a strong value proposition and shareholder-friendly initiatives, Perdoceo is well-positioned to deliver value to investors in the coming years.
