Perdoceo Education Corp (PRDO, Financial) experienced a daily loss of 6.36%, yet it has seen a 3-month gain of 6.53%. With an Earnings Per Share (EPS) of $2.15, investors may be pondering if the stock is modestly overvalued. This article delves into the valuation analysis of Perdoceo Education (PRDO), providing insights that could guide investors in their decision-making process.
Company Introduction
Perdoceo Education Corp is a prominent American for-profit education company that excels in providing quality online postsecondary education to a diverse student body. Its key segments, the American InterContinental University and Colorado Technical University, offer a range of undergraduate, graduate, and doctoral programs. With a focus on business, technology, management, and social services, Perdoceo Education continues to diminish its on-campus offerings, emphasizing its online universities. The company's revenue is primarily driven by the Colorado Technical University segment, and with a current stock price of $16.94 and a GF Value of $13.18, it appears to be trading above its estimated fair value.
Summarize GF Value
The GF Value is a unique valuation measure that determines the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. Perdoceo Education (PRDO, Financial) is currently positioned as modestly overvalued according to this measure. The GF Value Line suggests the fair value at which the stock should trade, and when the stock price ventures significantly above this line, it may indicate an overvaluation and potentially poorer future returns. Conversely, a price well below the GF Value Line could signal undervaluation and the possibility of higher future returns. Given Perdoceo Education's current price, the stock appears to be modestly overvalued, which could imply a lower long-term return on the stock compared to the company's business growth.
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Financial Strength
Assessing a company's financial strength is crucial before investing in its stock. Companies with a solid financial foundation are less likely to suffer a permanent loss. Perdoceo Education's cash-to-debt ratio of 20.79 outperforms 78.97% of its peers in the Education industry, showcasing its robust financial health. The company's overall financial strength receives a perfect score of 10 out of 10, indicating a strong financial position.
Profitability and Growth
Investing in profitable companies is generally less risky, especially those with a history of consistent profitability. High profit margins usually signal greater potential for performance. Perdoceo Education has maintained profitability for 6 out of the past 10 years. With a 12-month revenue of $738.20 million and an operating margin surpassing 84.5% of its industry competitors, the company's profitability is deemed fair.
Growth is a pivotal factor in a company's valuation. Historically, growth has been linked to long-term stock performance. Perdoceo Education's 3-year average annual revenue growth rate is 5%, ranking in the middle of the Education industry, while its 3-year average EBITDA growth rate of 16.4% is more competitive, surpassing 65.61% of its industry peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another method to evaluate profitability. If ROIC exceeds WACC, it suggests value creation for shareholders. Perdoceo Education's ROIC of 36.41 is significantly higher than its WACC of 8.73, indicating efficient cash flow generation in relation to capital investment.
Conclusion
In conclusion, Perdoceo Education (PRDO, Financial) appears modestly overvalued when considering its market price relative to the GF Value. However, the company's strong financial condition, fair profitability, and better-than-average industry growth position it as an interesting prospect for investors. For a deeper understanding of Perdoceo Education's financials, investors can explore the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
