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STRA or ATGE: Which School Stock Is a More Profitable Pick?
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The Zacks Schools industry has been gaining traction these days as increasing demand for healthcare professionals and the launch of new technologies are benefiting the country. Along with this, the rising popularity of e-books and online learning is encouraging.
However, the industry players have been facing challenges like higher advertising and marketing expenses, and costs pertaining to online education. Also, the advancement of generative artificial intelligence (AI) systems is a significant threat.
Some major industry players like Strategic Education, Inc. or SEI (STRA - Free Report) , Adtalem Global Education Inc. (ATGE - Free Report) , Universal Technical Institute, Inc. (UTI - Free Report) and Perdoceo Education Corporation (PRDO - Free Report) are primarily working on prudent cost management and persistently focusing on driving profitability and inorganic initiatives. Also, for-profit education companies are forging corporate and community college partnerships to educate their workforce.
Based on various parameters, let’s check whether STRA or ATGE is a better investment stock right now. It is to be noted that both companies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Determinants of the Stocks
Strategic Education — with a market cap of more than $2.55 billion — provides a range of post-secondary education and other academic programs in the United States. SEI provides undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, nursing, and public administration, along with criminal justice to working adult students through its physical campuses primarily located in the Mid-Atlantic and Southern regions. The programs are offered online as well.
The company has been witnessing impressive enrollment growth in the USHE and Education Technology Services segments. Furthermore, the focus on digital learning platforms, competency-based learning models and direct assessment capabilities bodes well.
Adtalem — with a market cap of more than $1.98 billion — is a leading healthcare education provider and workforce solutions innovator. The institutions of the company offer a wide array of programs across medical and healthcare services.
Adtalem is benefiting from solid enrollment growth, especially in Chamberlain and Walden, along with the efficient execution of its Growth with Purpose strategy. The uptrend in enrollment is backed by continued growth trends in pre-licensure and post-licensure nursing programs, and healthcare and non-healthcare programs. Furthermore, cost-saving initiatives, strategic collaborations, and focus on innovation investments are added benefits.
Zacks Estimates & Stock Performance
The Zacks Consensus Estimate for STRA’s 2024 earnings indicates a 24.5% year-over-year rise. ATGE’s bottom line for 2024 is likely to grow 10.2%. STRA’s earnings estimates have moved up in the past 30 days and the same for ATGE increased in the past 60 days. Although ATGE’s earnings expectation looks comparatively low, it has a better revenue projection of 6.4% than STRA’s 5%.
Image Source: Zacks Investment Research
Shares of Strategic Education and Adtalem have gained 27.6% and 8.1%, respectively, in the past six months compared with the industry’s 20.1% growth and S&P 500 Index’s 19.1% increase. STRA stock has fared better than ATGE, industry and S&P 500.
Meanwhile, considering earnings history, STRA and ATGE both surpassed estimates in the trailing four quarters, with average earnings surprises of 17.2% and 16.9%, respectively.
A Look at Stocks’ Profitability & Valuation
Return on Equity in the trailing 12 months for Strategic Education is 5.5% compared with Adtalem and the industry’s 13.1% and 19%, respectively.
Coming to the forward 12-month price-to-earnings (P/E) ratio, STRA and ATGE — are undervalued than the industry — with a ratio of 21.41 and 9.73, respectively. The industry has an average forward 12-month P/E ratio of 21.78, which is above the S&P 500’s average of 21.19. The industry is clearly overvalued than the S&P 500.
Comparing the two stocks, ATGE is less pricey and provides more impressive returns to investors than STRA.
Our Take
STRA certainly has the edge over ATGE in terms of better price performance and earnings prospects. ATGE, on the other hand, provides impressive returns to investors on lower investments.
Both companies remain optimistic about overall industry trends, given promising fundamentals and improving parameters. The U.S. healthcare sector is presently grappling with a pronounced shortage of skilled professionals, which is posing a significant risk to the quality of care and further exacerbating health disparities across the country. The companies have designed their programs to be rigorous and well-suited to address the workforce needs of the healthcare industry.
A Brief Overview of the Other Two Stocks
Universal Technical Institute: Headquartered in Phoenix, AZ, this company offers transportation, skilled trades and healthcare education programs across the United States. In 2024, the company continues to maintain a strong position, driven by its emphasis on boosting enrollment, revenue and profit growth through recent program launches. Additionally, it aims to maximize returns on marketing and admissions investments while optimizing workforce and facility utilization to enhance margin expansion and operating leverage.
UTI, sporting a Zacks Rank #1, has remained stable for fiscal 2024 earnings at 70 cents per share over the past 60 days. This company’s earnings for fiscal 2024 are expected to grow 438.5%. Its earnings topped consensus estimates in three of the trailing four quarters and missed on another occasion, with the average surprise being 126%.
Perdoceo Education: Headquartered in Schaumburg, IL, this company offers postsecondary education programs through online, campus-based and blended learning formats across the United States. It has been benefiting from an improvement in the enrollment trend in its Colorado Technical University (“CTU”) segment. Apart from higher revenues, operating efficiencies at both CTU and American InterContinental University bode well. The company’s focus on increased investments in technology and student-serving processes drives growth.
PRDO, carrying a Zacks Rank #2 (Buy), has seen an upward estimate revision for 2024 earnings to $2.12 per share from $2.10 over the past 60 days. This company’s earnings for 2024 are expected to grow 1%. Its earnings topped consensus estimates in each of the trailing four quarters, with the average surprise being 17.2%.
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STRA or ATGE: Which School Stock Is a More Profitable Pick?
The Zacks Schools industry has been gaining traction these days as increasing demand for healthcare professionals and the launch of new technologies are benefiting the country. Along with this, the rising popularity of e-books and online learning is encouraging.
However, the industry players have been facing challenges like higher advertising and marketing expenses, and costs pertaining to online education. Also, the advancement of generative artificial intelligence (AI) systems is a significant threat.
Some major industry players like Strategic Education, Inc. or SEI (STRA - Free Report) , Adtalem Global Education Inc. (ATGE - Free Report) , Universal Technical Institute, Inc. (UTI - Free Report) and Perdoceo Education Corporation (PRDO - Free Report) are primarily working on prudent cost management and persistently focusing on driving profitability and inorganic initiatives. Also, for-profit education companies are forging corporate and community college partnerships to educate their workforce.
Based on various parameters, let’s check whether STRA or ATGE is a better investment stock right now. It is to be noted that both companies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Determinants of the Stocks
Strategic Education — with a market cap of more than $2.55 billion — provides a range of post-secondary education and other academic programs in the United States. SEI provides undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, nursing, and public administration, along with criminal justice to working adult students through its physical campuses primarily located in the Mid-Atlantic and Southern regions. The programs are offered online as well.
The company has been witnessing impressive enrollment growth in the USHE and Education Technology Services segments. Furthermore, the focus on digital learning platforms, competency-based learning models and direct assessment capabilities bodes well.
Adtalem — with a market cap of more than $1.98 billion — is a leading healthcare education provider and workforce solutions innovator. The institutions of the company offer a wide array of programs across medical and healthcare services.
Adtalem is benefiting from solid enrollment growth, especially in Chamberlain and Walden, along with the efficient execution of its Growth with Purpose strategy. The uptrend in enrollment is backed by continued growth trends in pre-licensure and post-licensure nursing programs, and healthcare and non-healthcare programs. Furthermore, cost-saving initiatives, strategic collaborations, and focus on innovation investments are added benefits.
Zacks Estimates & Stock Performance
The Zacks Consensus Estimate for STRA’s 2024 earnings indicates a 24.5% year-over-year rise. ATGE’s bottom line for 2024 is likely to grow 10.2%. STRA’s earnings estimates have moved up in the past 30 days and the same for ATGE increased in the past 60 days. Although ATGE’s earnings expectation looks comparatively low, it has a better revenue projection of 6.4% than STRA’s 5%.
Image Source: Zacks Investment Research
Shares of Strategic Education and Adtalem have gained 27.6% and 8.1%, respectively, in the past six months compared with the industry’s 20.1% growth and S&P 500 Index’s 19.1% increase. STRA stock has fared better than ATGE, industry and S&P 500.
Meanwhile, considering earnings history, STRA and ATGE both surpassed estimates in the trailing four quarters, with average earnings surprises of 17.2% and 16.9%, respectively.
A Look at Stocks’ Profitability & Valuation
Return on Equity in the trailing 12 months for Strategic Education is 5.5% compared with Adtalem and the industry’s 13.1% and 19%, respectively.
Coming to the forward 12-month price-to-earnings (P/E) ratio, STRA and ATGE — are undervalued than the industry — with a ratio of 21.41 and 9.73, respectively. The industry has an average forward 12-month P/E ratio of 21.78, which is above the S&P 500’s average of 21.19. The industry is clearly overvalued than the S&P 500.
Comparing the two stocks, ATGE is less pricey and provides more impressive returns to investors than STRA.
Our Take
STRA certainly has the edge over ATGE in terms of better price performance and earnings prospects. ATGE, on the other hand, provides impressive returns to investors on lower investments.
Both companies remain optimistic about overall industry trends, given promising fundamentals and improving parameters. The U.S. healthcare sector is presently grappling with a pronounced shortage of skilled professionals, which is posing a significant risk to the quality of care and further exacerbating health disparities across the country. The companies have designed their programs to be rigorous and well-suited to address the workforce needs of the healthcare industry.
A Brief Overview of the Other Two Stocks
Universal Technical Institute: Headquartered in Phoenix, AZ, this company offers transportation, skilled trades and healthcare education programs across the United States. In 2024, the company continues to maintain a strong position, driven by its emphasis on boosting enrollment, revenue and profit growth through recent program launches. Additionally, it aims to maximize returns on marketing and admissions investments while optimizing workforce and facility utilization to enhance margin expansion and operating leverage.
UTI, sporting a Zacks Rank #1, has remained stable for fiscal 2024 earnings at 70 cents per share over the past 60 days. This company’s earnings for fiscal 2024 are expected to grow 438.5%. Its earnings topped consensus estimates in three of the trailing four quarters and missed on another occasion, with the average surprise being 126%.
Perdoceo Education: Headquartered in Schaumburg, IL, this company offers postsecondary education programs through online, campus-based and blended learning formats across the United States. It has been benefiting from an improvement in the enrollment trend in its Colorado Technical University (“CTU”) segment. Apart from higher revenues, operating efficiencies at both CTU and American InterContinental University bode well. The company’s focus on increased investments in technology and student-serving processes drives growth.
PRDO, carrying a Zacks Rank #2 (Buy), has seen an upward estimate revision for 2024 earnings to $2.12 per share from $2.10 over the past 60 days. This company’s earnings for 2024 are expected to grow 1%. Its earnings topped consensus estimates in each of the trailing four quarters, with the average surprise being 17.2%.