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Why Investors Should Retain Strategic Education (STRA) Now
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Strategic Education, Inc.’s (STRA - Free Report) shares have gained strongly compared with the Zacks Schools industry, the Zacks Consumer Discretionary sector and the S&P 500 index. In the past year, the stock has gained 38.2% compared with the industry’s 7.6% increase. The sector and S&P 500 index have declined 37.6% and 20.7%, respectively, in the same time frame.
This post-secondary education provider primarily banks on improving demand strength across all of U.S. higher education and continued strong growth within the Education Technology and Services segment. Also, the emphasis on a competency-based learning model and direct assessment capabilities bode well.
However, lower new student enrollment within the USHE segment remains a concern. The company expects total enrollment to be down in the mid-single digits in 2022.
Image Source: Zacks Investment Research
Major Growth Drivers
Strategic Learning Model: Capella continuously invests in introducing new programs and specializations to improve student outcomes. Continuous innovation and course updates expand its product portfolio, which in turn boosts enrollments and drives long-term growth. The company is focusing on providing programs based on a “competency-based learning model and direct assessment capabilities.” One of these innovations is FlexPath. FlexPath continues to be one of the company’s fastest-growing programs as it allows students to focus on leveraging their skills and knowledge gained during professional hours.
Direct Assessment Ability: The Department of Education granted approvals for a small number of institutions to operate direct assessment academic programs primarily to mitigate COVID-19 impacts. Capella University operates direct assessment courses within FlexPath programs.
RightSkill offers workforce-development programs, such as retail management and technical support. The demand for RightSkill is expected to rise further with increasing demand from employers for job-ready candidates to address the skills gap in the United States.
During the fourth quarter of 2020, the company launched its new Workforce Edge product. With its coverage of Strayer and Capella Universities and schools from Noodle Partners, the company expects this platform to serve as a low-cost source of new enrollments.
Enrollment Concerns
Strategic Education has been witnessing lower demand post pandemic. In 2021, student enrollments within USHE declined 11.0% from 2020 levels. This continued in the first, second and third quarters of 2022, where student enrollments within USHE dropped 12.6%, 8.6% and 3.1%, respectively, year over year. The segment’s revenues were also down 13.6%, 10.5% and 3.3%, respectively, given lower enrollments and revenues per student.
Based on the declines in new student enrollments within the USHE segment that it witnessed during the past two years and the first nine months of 2022, the company expects that the total enrollment for SEI could be down in 2022.
The company noted that the impact of rising unemployment was largely seen at Strayer as a result of the undergraduate student mix, which included many first-time college students. Also, it has been witnessing increased competitive intensity, which resulted in advertising inflation and thereby lowered the yield of marketing investments.
Hilton Grand Vacations currently has a Zacks Rank #1. HGV has a trailing four-quarter earnings surprise of 3.7%, on average. The stock has declined 25.2% in the past year.
The Zacks Consensus Estimate for HGV’s 2023 sales and earnings per share (EPS) indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average. The stock has gained 27.3% in the past year.
The Zacks Consensus Estimate for RICK’s 2023 sales and EPS indicates growth of 12.7% and 10.6%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has declined 3.3% in the past year.
The Zacks Consensus Estimate for H’s 2023 sales and EPS indicates a surge of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.
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Why Investors Should Retain Strategic Education (STRA) Now
Strategic Education, Inc.’s (STRA - Free Report) shares have gained strongly compared with the Zacks Schools industry, the Zacks Consumer Discretionary sector and the S&P 500 index. In the past year, the stock has gained 38.2% compared with the industry’s 7.6% increase. The sector and S&P 500 index have declined 37.6% and 20.7%, respectively, in the same time frame.
This post-secondary education provider primarily banks on improving demand strength across all of U.S. higher education and continued strong growth within the Education Technology and Services segment. Also, the emphasis on a competency-based learning model and direct assessment capabilities bode well.
However, lower new student enrollment within the USHE segment remains a concern. The company expects total enrollment to be down in the mid-single digits in 2022.
Image Source: Zacks Investment Research
Major Growth Drivers
Strategic Learning Model: Capella continuously invests in introducing new programs and specializations to improve student outcomes. Continuous innovation and course updates expand its product portfolio, which in turn boosts enrollments and drives long-term growth. The company is focusing on providing programs based on a “competency-based learning model and direct assessment capabilities.” One of these innovations is FlexPath. FlexPath continues to be one of the company’s fastest-growing programs as it allows students to focus on leveraging their skills and knowledge gained during professional hours.
Direct Assessment Ability: The Department of Education granted approvals for a small number of institutions to operate direct assessment academic programs primarily to mitigate COVID-19 impacts. Capella University operates direct assessment courses within FlexPath programs.
RightSkill offers workforce-development programs, such as retail management and technical support. The demand for RightSkill is expected to rise further with increasing demand from employers for job-ready candidates to address the skills gap in the United States.
During the fourth quarter of 2020, the company launched its new Workforce Edge product. With its coverage of Strayer and Capella Universities and schools from Noodle Partners, the company expects this platform to serve as a low-cost source of new enrollments.
Enrollment Concerns
Strategic Education has been witnessing lower demand post pandemic. In 2021, student enrollments within USHE declined 11.0% from 2020 levels. This continued in the first, second and third quarters of 2022, where student enrollments within USHE dropped 12.6%, 8.6% and 3.1%, respectively, year over year. The segment’s revenues were also down 13.6%, 10.5% and 3.3%, respectively, given lower enrollments and revenues per student.
Based on the declines in new student enrollments within the USHE segment that it witnessed during the past two years and the first nine months of 2022, the company expects that the total enrollment for SEI could be down in 2022.
The company noted that the impact of rising unemployment was largely seen at Strayer as a result of the undergraduate student mix, which included many first-time college students. Also, it has been witnessing increased competitive intensity, which resulted in advertising inflation and thereby lowered the yield of marketing investments.
Zacks Rank & Key Picks
Currently, Strategic Education carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hilton Grand Vacations Inc. (HGV - Free Report) , RCI Hospitality Holdings, Inc. (RICK - Free Report) and Hyatt Hotels Corporation (H - Free Report) .
Hilton Grand Vacations currently has a Zacks Rank #1. HGV has a trailing four-quarter earnings surprise of 3.7%, on average. The stock has declined 25.2% in the past year.
The Zacks Consensus Estimate for HGV’s 2023 sales and earnings per share (EPS) indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average. The stock has gained 27.3% in the past year.
The Zacks Consensus Estimate for RICK’s 2023 sales and EPS indicates growth of 12.7% and 10.6%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has declined 3.3% in the past year.
The Zacks Consensus Estimate for H’s 2023 sales and EPS indicates a surge of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.