September 24, 2023

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Perdoceo Education (PRDO) ended 2022 in style. In fact, Q4 results released by the company last night showed that student enrollments at its American Intercontinental University System (AIUS) were still down 10.8% due to previously reported COVID-related dynamics and PRDO’s marketing process. due to adjustments made. Colorado Technical University (CTU) enjoyed a second consecutive quarter of growth with 2.0% enrollment, aided by its corporate partnership program. As a result, overall enrollment for the company was down only 3.0% (after experiencing much of the decline in the first half of 2022). And including learners participating in non-degree-seeking and professional development programs or degree-seeking, non-Title IV, self-paced programs, enrollment would have been even lower.

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This better-than-anticipated student retention and engagement helped drive a 10.2% increase in revenue for the period to $176.2 million, which handily beat analyst forecasts of $164.8 million. And while PRDO continues to do an excellent job driving operational efficiencies into penetration and marketing, adjusted earnings per share fell 22.5% to 31 cents below expectations and exceeded the top end of the company’s guidance of 27-30 cents. Went. Certain non-recurring investments of their educational institutions made in human capital, marketing and other operational processes during the quarter will also have to be absorbed.

What’s more, this solid operating performance allowed the company to generate an additional $37 million in free cash flow during Q4. Thus, even after spending roughly $45 million in December 2022 to buy Coding Dojo, an education technology company that provides upskilling and reskilling opportunities in technology and various computer programming languages, PRDO’s cash balance declined by just $7 million to $518. million left. And with the company remaining debt-free, this huge cash pile is worth $7.57 in net cash per share, or about 56% of its current share price.

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More importantly, to match PRDO’s new marketing strategies with its increased focus on identifying potential students who are most likely to succeed at one of its two universities – leading to student enrollment in the fourth quarter of 2021 There has been a steady marginal improvement in engagement. —Now being fully annualized, the company sees further gains in student retention and engagement. As a result, it thinks it can earn 55-57 cents per share in Q1, which suggests growth of 10-14% from the prior year. And given that the stock is still trading at less than 9 times adjusted earnings per share at the low end of $1.63-1.85, PRDO expects all of 2023, the midpoint of which is also a solid year of 7%. -Indicates year-over-year growth, I think today’s muted reaction to this news is due to overall market weakness and fully expect the stock to resume its recent up trend in short order Will do

Julius Zuenemann is a CFA equity analyst and associate editor forbes special status survey And forbes investor Investment newsletter. Perdoceo Education (PRDO) has a current recommendation forbes investor, It is being recommended to access and through other stocks forbes investorPlease click here to subscribe.