The rapid shift towards online learning and technology-enabled education has emerged as a powerful force that shows no signs of slowing down.
Therefore, I think education stocks Stride, Inc. (LRN), QuantaSing Group Limited (QSG), and Lincoln Educational Services Corporation (LINC) might be ideal picks for your watchlist.
Escalating acceptance of online education over conventional modes owing to the COVID-19 outbreak is predicted to contribute majorly to the growth of the U.S. education market. Apart from this, the rise in popularity of online books as well as e-books is expected to embellish the growth of the industry.
The global U.S. education market is predicted to grow at a CAGR of nearly 4.5% until 2028 to reach approximately $2.30 trillion.
In addition, edTech is expected to continue leveraging technology and build complementarity with expertise across the learning ecosystem of trainers, learning consultants, universities, and coaches.
The worldwide EdTech market is anticipated to increase approximately $230 billion by 2028.
Take a look at the stocks mentioned above:
Stride, Inc. (LRN)
LRN is a technology-based education service company, provides proprietary and third-party online curriculum, software systems, and educational services to facilitate individualized learning for students primarily in kindergarten through 12th grade (K-12) in the United States and internationally.
LRN’s trailing-12-month asset turnover ratio of 1.10x is 9.9% higher than the 1.01x industry average. Its trailing-12-month return on total capital of 7.08% is 16.2% higher than the 6.10% industry average.
During the fiscal third quarter ended March 31, 2023, LRN revenues increased 11.5% year-over-year to $470.28 million. Its adjusted EBITDA increased 15% year-over-year to $103.89 million. Also, its net income per share increased 27.5% year-over-year to $1.30.
LRN’s EPS is expected to increase 38.5% year-over-year to $0.91 for the fiscal fourth quarter ending June 2023. The company’s revenue for the same quarter is expected to increase 1.2% year-over-year to $460.70 million. Also, it has surpassed revenue estimates in each of the trailing four quarters, which is impressive.
Shares of LRN have gained 32.8% year-to-date to close the last trading session at $41.53.
LRN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Momentum, and Value. It is ranked #4 out of 20 in the B-rated Outsourcing - Education Services industry.
Beyond what is stated above, we’ve also rated LRN for Stability, Sentiment, and Quality. Get all LRN ratings here.
QuantaSing Group Limited (QSG)
Based in Beijing, QSG provides online learning services in the People's Republic of China.
QSG’s trailing-12-month asset turnover ratio of 6.14x is 510.7% higher than the 1.01x industry average. Its trailing-12-month gross profit margin of 86.71% is 146.7% higher than the 35.15% industry average.
QSG's revenue increased 16.8% year-over-year to RMB807.24 million ($117.54 million) in the fiscal first quarter that ended March 31, 2023. Its gross profit increased 22.5% year-over-year to RMB706.19 million ($102.83 million). Also, its adjusted net income per share increased 30% year-over-year to $0.13.
The stock has declined 2% over the past five days to close the last trading session at $8.87.
QSG’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
QSG has a B grade for Sentiment. It is ranked #7 in the same industry.
Click here to see the additional POWR Ratings for QSG (Growth, Value, Stability, Quality, and Momentum).
Lincoln Educational Services Corporation (LINC)
LINC provides various career-oriented post-secondary education services to high school graduates and working adults in the United States. The company operates in two segments: Transportation and Skilled Trades; and Healthcare and Other Professions.
Its trailing-12-month asset turnover ratio of 1.24x is 23.4% higher than the 1.01x industry average. Its trailing-12-month gross profit ratio of 57.33% is 63.1% higher than the 35.15% industry average.
On May 16, LINC announced a new collaboration with Hunter Engineering, the leading name in the undercar service industry. Lincoln Tech’s Denver campus will become the latest site to house a Hunter Training Center, where students can train directly on patented Hunter equipment.
LINC’s revenue increased 5.7% year-over-year to $87.28 million in the fiscal first quarter, which ended March 31, 2023. Adjusted net income increased 82.6% year-over-year to $911 million. Also, adjusted EBITDA of campus operations increased 15.5% year-over-year to $11.55 million.
The stock has gained 16.9% over the past month to close the last trading session at $6.70.
LINC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
LINC also has an A grade for Sentiment and a B in Value, Momentum, and Stability. It is ranked #3 in the same industry.
To access additional ratings for LINC’s Growth and Quality, click here.
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LRN shares were trading at $41.75 per share on Tuesday morning, up $0.22 (+0.53%). Year-to-date, LRN has gained 33.47%, versus a 12.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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