Schools industry comprising for-profit education companies is well poised for the rest of 2021 as it continues reaping benefits from the rise in virtual delivery of education. Many industry bellwethers like GP Strategies Corporation , American Public Education, Inc. ( APEI Quick Quote APEI - Free Report) , Laureate Education, Inc. ( LAUR Quick Quote LAUR - Free Report) and Adtalem Global Education Inc. ( ATGE Quick Quote ATGE - Free Report) undertook initiatives like various online education platforms, cost-cutting efforts, investment in non-degree programs that are specifically aimed at meeting the educational needs of working adults in targeted professions. However, the industry is witnessing soft enrollment, increased competition, higher expenses for various programs and shortage of skilled labor. The collective industry has declined 65.3% so far this year compared with the Zacks Consumer Discretionary sector’s 4% fall. The S&P 500 Index has gained 20.6% in the same time frame. Nonetheless, the above-mentioned education providers are confident about the industry’s growth for the remainder of 2021, backed by their prudent cost management and a continued focus on driving profitability along with strategic initiatives. Image Source: Zacks Investment Research
Based on above-mentioned tailwinds, let’s check out whether GP Strategies or American Public is more appealing to investors. It is to be noted that both companies are almost neck to neck in terms of market cap and currently carry a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Determinants of the Stocks
GP Strategies with a market cap of $363.5 million is a leading workforce transformation partner. It offers workforce performance solutions to organizations like Automotive, Financial Services, Defense and Aerospace, and Technology including Global Fortune 500 and other commercial customers across other major industries. The company primarily banks on global expansion through strategic acquisitions and subsidiaries’ establishment. Also, a large range of digital platforms, technical expertise, innovative solutions to clients and intelligent cost containment is adding to the positives.
Conversely, American Public with a market cap of $497.3 million is an online and campus-based postsecondary education provider. It primarily serves approximately 91,500 students through two subsidiary institutions, namely American Public University System, Inc. or APUS and Hondros College of Nursing or HCN. The company steadily benefits from a strong visibility at HCN, solid enrollment momentum and robust digital marketing campaigns. Also, initiatives like affordable tuition, online programs, strategic efforts aimed at improving student success and strong digital marketing campaigns are likely to benefit the company going forward. Strong Brand Presence & Customer Spectrum
Although GP Strategies is a slightly smaller company than American Public in terms of market cap, it has a large spectrum of customers as it serves more than 750 organizations across the world. In contrast, American Public primarily serves the military and public service communities through APUS, and the nursing and healthcare communities via HCN.
Both companies’ customer-centric approach, and focus on technology is encouraging. Prospects & Stock Performance
The Zacks Consensus Estimate for GP Strategies' 2021 earnings indicates 42.5% growth from the prior-year reported number. The same for American Public’s bottom line for the year is likely to decline 25.6% from the year-ago reported figure. GP Strategies has a
VGM Score of A. Shares of GP Strategies have gained 74.1% in the year-to-date period against American Public’s 12.7% fall. Nonetheless, both stocks have outperformed the industry’s 65.3% decrease in the same period. Thus, GP Strategies is a clear winner in terms of earnings growth prospects and share price performance. A Look at the Stocks’ Profitability & Valuation
Return on Equity in the trailing 12 months for GP Strategies is 9.1% compared with American Public and the industry’s 5.2% and 6.5%, respectively. GP Strategies provides impressive returns to investors than American Public and the industry.
The trailing 12-month price-to-earnings multiple for GP Strategies and American Public is 18.49 and 22.74, respectively, compared with the industry’s 9.1. American Public’s shares are a bit costlier than GP Strategies and the industry. Our Take
GP Strategies certainly has an edge over American Public in terms of stock performance, expected earnings growth for 2021, return and valuation. Nonetheless, both companies remain optimistic about the overall industry growth trends, given solid demand for online education and professional courses, offsetting expansion-related higher costs and expenses.