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Strategic Education (STRA) Gains 19% YTD: Is It Time to Buy?
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Strategic Education, Inc. (STRA - Free Report) has gained 18.5% in the year-to-date period, outperforming the Zacks Schools industry’s 3.3% growth. The company’s stock also seemed to have fared better than some of the well-known players in the industry including Stride, Inc. (LRN - Free Report) , Adtalem Global Education Inc. (ATGE - Free Report) , and Grand Canyon Education, Inc. (LOPE - Free Report) , whose shares gained 15.8%, 15.3%, and 8.4%, respectively, in the same time frame.
Price Performance
Image Source: Zacks Investment Research
During the same time frame, the Zacks Consumer Discretionary sector declined 1.8% while the S&P 500 Index rose 16.7%, quite laidback compared with STRA.
Among the mentioned players, Strategic Education is currently on the top of the ladder considering the uptick in enrollments. The U.S. Higher Education, or USHE, segment has been fostering growth for some time but the rebound of the Australia/New Zealand, or ANZ, segment, as of the first quarter of 2024 results, has embarked the company toward further upliftment.
Even in an inflationary environment, STRA has been witnessing margin expansion through its disciplined expense management along with leveraging its top-line growth.
Driving Factors of the Stock
USHE Enrollment Growth: The USHE segment is showcasing performance strength on the back of solid student enrollment from the last four quarters. During the first quarter of 2024, total student enrollment within this segment increased 9.8% to 87,731 compared with 79,935 reported a year ago. Notably, Strayer and Capella Universities reported strong new student enrollment. Also, it witnessed strong growth in employer-affiliated enrollment, which grew 22% year over year on the back of continuous strength in Strategic Education’s corporate partnerships. The student persistence in the segment remained stable at 87%.
For 2024, STRA expects the enrollment under this segment to grow year over year between 4% and 6%. Given the ongoing strength in student enrollment, USHE is well-positioned to attain its expected growth rate.
ANZ Segment’s Rebound: Strategic Education’s ANZ segment seems to have redeemed itself in the first quarter after undergoing a decline in student enrollments from the past few quarters. During the quarter, total student enrollment increased 4.8% to 20,197 from 19,269 reported a year ago. The uptrend was driven by onshore international enrollment, which was understood to be international students already in Australia who either reenrolled or transferred to Torrens University during the quarter. This, alongside increased revenue per student, aided the uptick in the revenues by 14.1% to $47.4 million year over year.
Owing to the improving enrollment growth, the company anticipates this segment’s student enrollment to grow between 3% and 4%, year over year, in 2024.
Diversified Program Offerings: Under Strategic Education’s USHE segment, Capella University is continuously investing in introducing new programs and specializations to improve student outcomes. Continuous innovation and course update initiatives are adding to the expansion of its product portfolio, thus boosting enrollments and driving long-term growth. One such innovation is FlexPath, which is STRA’s fastest-growing program as it allows students to focus on leveraging their skills and knowledge gained during professional hours. FlexPath enrollments represented 23% of USHE enrollments in the first quarter, up from 21% reported in the prior-year period.
Another product offering is Workforce Edge, launched in 2021. Operating under STRA’s Education Technology Services segment, this program serves as a low-cost source of new enrollments, offering a full-service education benefits administration solution for employers. The coverage comprises Strayer and Capella Universities and schools from Noodle Partners. As of Mar 31, 2024, Workforce Edge had a total of 68 corporate agreements, collectively employing approximately 1,470,000 employees. Year over year, the total enrollments from Workforce Edge were up 62% to about 1,600 students in the first quarter.
Estimate Trend Revision
The Zacks Consensus Estimate of the company's 2024 earnings per share (EPS) has trended upward to $4.96 from $4.91 over the past 60 days. The estimated figure indicates 33.3% growth from the prior year’s reported levels. Over the said time frame, although the consensus estimate for second-quarter 2024 EPS has remained unchanged at $1.20, it indicates 46.3% year-over-year growth. This bullish trend justifies the stock’s addition to investors’ portfolios.
EPS Trend
Image Source: Zacks Investment Research
This provider of post-secondary education and other academic programs in the United States has a long-term EPS growth rate of 20.8%, highlighting its inherent strength.
Should the Stock be Added to Portfolio?
As discussed above, Strategic Education is notably benefiting from strength in enrollments and diversified product offerings, which are directly uplifting its top-line performance. Along with its benefits, the company is consistently rewarding its shareholders through dividend payments and share repurchases.
The company has consistently paid dividends since 1996, thus prioritizing its shareholder value. On Apr 25, 2024, it declared a quarterly cash dividend on its common stock of 60 cents, which was paid on Jun 3, 2024, to shareholders of record as of May 24. Paying dividends not only enhances shareholder returns but also raises the market value of the stock.
The company’s current dividend yield of 2.19% is higher than the industry’s 0.22%, S&P 500’s 1.26% and the sector’s 0.88%. Check STRA’s dividend history here.
P/E Ratio
Image Source: Zacks Investment Research
Moreover, STRA’s forward 12-month price-to-earnings (P/E) ratio of 20.25X is slightly below the industry average of 21.06X. The undervaluation of the stock in comparison with its peers makes it potentially attractive to investors.
Image: Bigstock
Strategic Education (STRA) Gains 19% YTD: Is It Time to Buy?
Strategic Education, Inc. (STRA - Free Report) has gained 18.5% in the year-to-date period, outperforming the Zacks Schools industry’s 3.3% growth. The company’s stock also seemed to have fared better than some of the well-known players in the industry including Stride, Inc. (LRN - Free Report) , Adtalem Global Education Inc. (ATGE - Free Report) , and Grand Canyon Education, Inc. (LOPE - Free Report) , whose shares gained 15.8%, 15.3%, and 8.4%, respectively, in the same time frame.
Price Performance
Image Source: Zacks Investment Research
During the same time frame, the Zacks Consumer Discretionary sector declined 1.8% while the S&P 500 Index rose 16.7%, quite laidback compared with STRA.
Among the mentioned players, Strategic Education is currently on the top of the ladder considering the uptick in enrollments. The U.S. Higher Education, or USHE, segment has been fostering growth for some time but the rebound of the Australia/New Zealand, or ANZ, segment, as of the first quarter of 2024 results, has embarked the company toward further upliftment.
Even in an inflationary environment, STRA has been witnessing margin expansion through its disciplined expense management along with leveraging its top-line growth.
Driving Factors of the Stock
USHE Enrollment Growth: The USHE segment is showcasing performance strength on the back of solid student enrollment from the last four quarters. During the first quarter of 2024, total student enrollment within this segment increased 9.8% to 87,731 compared with 79,935 reported a year ago. Notably, Strayer and Capella Universities reported strong new student enrollment. Also, it witnessed strong growth in employer-affiliated enrollment, which grew 22% year over year on the back of continuous strength in Strategic Education’s corporate partnerships. The student persistence in the segment remained stable at 87%.
For 2024, STRA expects the enrollment under this segment to grow year over year between 4% and 6%. Given the ongoing strength in student enrollment, USHE is well-positioned to attain its expected growth rate.
ANZ Segment’s Rebound: Strategic Education’s ANZ segment seems to have redeemed itself in the first quarter after undergoing a decline in student enrollments from the past few quarters. During the quarter, total student enrollment increased 4.8% to 20,197 from 19,269 reported a year ago. The uptrend was driven by onshore international enrollment, which was understood to be international students already in Australia who either reenrolled or transferred to Torrens University during the quarter. This, alongside increased revenue per student, aided the uptick in the revenues by 14.1% to $47.4 million year over year.
Owing to the improving enrollment growth, the company anticipates this segment’s student enrollment to grow between 3% and 4%, year over year, in 2024.
Diversified Program Offerings: Under Strategic Education’s USHE segment, Capella University is continuously investing in introducing new programs and specializations to improve student outcomes. Continuous innovation and course update initiatives are adding to the expansion of its product portfolio, thus boosting enrollments and driving long-term growth. One such innovation is FlexPath, which is STRA’s fastest-growing program as it allows students to focus on leveraging their skills and knowledge gained during professional hours. FlexPath enrollments represented 23% of USHE enrollments in the first quarter, up from 21% reported in the prior-year period.
Another product offering is Workforce Edge, launched in 2021. Operating under STRA’s Education Technology Services segment, this program serves as a low-cost source of new enrollments, offering a full-service education benefits administration solution for employers. The coverage comprises Strayer and Capella Universities and schools from Noodle Partners. As of Mar 31, 2024, Workforce Edge had a total of 68 corporate agreements, collectively employing approximately 1,470,000 employees. Year over year, the total enrollments from Workforce Edge were up 62% to about 1,600 students in the first quarter.
Estimate Trend Revision
The Zacks Consensus Estimate of the company's 2024 earnings per share (EPS) has trended upward to $4.96 from $4.91 over the past 60 days. The estimated figure indicates 33.3% growth from the prior year’s reported levels. Over the said time frame, although the consensus estimate for second-quarter 2024 EPS has remained unchanged at $1.20, it indicates 46.3% year-over-year growth. This bullish trend justifies the stock’s addition to investors’ portfolios.
EPS Trend
Image Source: Zacks Investment Research
This provider of post-secondary education and other academic programs in the United States has a long-term EPS growth rate of 20.8%, highlighting its inherent strength.
Should the Stock be Added to Portfolio?
As discussed above, Strategic Education is notably benefiting from strength in enrollments and diversified product offerings, which are directly uplifting its top-line performance. Along with its benefits, the company is consistently rewarding its shareholders through dividend payments and share repurchases.
The company has consistently paid dividends since 1996, thus prioritizing its shareholder value. On Apr 25, 2024, it declared a quarterly cash dividend on its common stock of 60 cents, which was paid on Jun 3, 2024, to shareholders of record as of May 24. Paying dividends not only enhances shareholder returns but also raises the market value of the stock.
The company’s current dividend yield of 2.19% is higher than the industry’s 0.22%, S&P 500’s 1.26% and the sector’s 0.88%. Check STRA’s dividend history here.
P/E Ratio
Image Source: Zacks Investment Research
Moreover, STRA’s forward 12-month price-to-earnings (P/E) ratio of 20.25X is slightly below the industry average of 21.06X. The undervaluation of the stock in comparison with its peers makes it potentially attractive to investors.
Based on the aforementioned tailwinds and positive estimate trend revision, investors can consider this Zacks Rank #2 (Buy) stock in their portfolio for now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.