Supercharge Your October Portfolio With These 3 Promising Education Stocks

Surging internet penetration and adoption of technological innovation are fuelling the education industry. Hence, fundamentally strong education stocks Lincoln Educational Services (LINC), Adtalem Global Education (ATGE), and Perdoceo Education (PRDO) might be solid additions to one’s portfolio. Read more...

The education sector appears well-positioned for sustained expansion due to rising educational investments and continuous advancements.

In this promising landscape, I present three education stocks, Lincoln Educational Services Corporation (LINC), Adtalem Global Education Inc. (ATGE), and Perdoceo Education Corporation (PRDO), that have the potential to supercharge your portfolio this October. These companies also boast robust profit margins.

As household incomes have steadily climbed, families have been more inclined to invest in education, prioritizing it to secure a brighter future for their children. Moreover, the ever-expanding reach of the internet has brought about a profound revolution in how education is delivered and accessed.

Also, the surging population of children under five, increasing labor force participation of women, and growing government initiatives and educational funding are contributing to the growth of the U.S. education market.

The U.S. education market is projected to reach $2.14 trillion by 2027, growing at a CAGR of 4.9%.

In addition, as edTech solutions advance alongside technologies like IoT, AI, and AR/VR, they are poised to contribute significantly to market growth. The demand for personalized learning, efficient grading, smart content delivery, and intelligent tutoring systems is driving the growth of AI in education.

The global education technology market was valued at $123.40 billion in 2022 and is expected to expand at a CAGR of 13.6% from 2023 to 2030.

Furthermore, smart classrooms, equipped with multimedia and interactive elements, are also playing a pivotal role in expanding the EdTech market by enhancing the teaching and learning processes.

In light of these promising trends, let's look at the fundamentals of the three best Outsourcing – Education Services stocks, beginning with number 3.

Stock #3: Lincoln Educational Services Corporation (LINC)

LINC provides 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.

LINC’s trailing-12-month gross profit margin of 57.15% is 61.2% higher than the 35.45% industry average. Its 8.13% trailing-12-month net income margin is 84.2% higher than the 4.42% industry average.

On August 24, LINC announced that it was expanding its START program in partnership with Tesla, Inc. (TSLA) by establishing a training facility on its Columbia, MD campus. This program offers free training to eligible students, including an hourly stipend.

On August 1, LINC announced that it would introduce a Medical Assistant career training program at its Columbia, MD campus later this year. With more than 22,000 positions projected to open in Maryland alone, Medical Assisting graduates will be in demand in various healthcare settings.

LINC’s revenue increased 7.9% year-over-year to $88.65 million in the fiscal second quarter, which ended June 30, 2023. Its total cost and expenses declined 20.3% year-over-year to $65.13 million. Adjusted net income increased 154.2% year-over-year to $450 thousand. Also, its adjusted EBITDA rose 6.2% year-over-year to $2.44 million.

LINC’s EPS and revenue for the fiscal year 2023 are expected to grow 131.3% and 4.8% year-over-year to $0.83 and $365.15 million. The company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.

The stock has gained 56.1% over the past year and 37.2% over the past three months to close the last trading session at $8.57.

LINC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an A grade for Sentiment and a B for Value, Stability, and Quality. Among 20 stocks in the A-rated Outsourcing – Education Services industry, it is ranked #3.

In addition to the POWR Ratings stated above, one can access additional ratings for LINC’s Growth and Momentum here.

Stock #2: Adtalem Global Education Inc. (ATGE)

ATGE provides workforce solutions worldwide. It operates through three segments: Chamberlain; Walden; and Medical and Veterinary.

ATGE’s trailing-12-month gross profit margin of 55.30% is 56% higher than the 35.45% industry average. Its 6.43% trailing-12-month net income margin is 45.7% higher than the 4.43% industry average.

On September 12, ATGE and DaVita Inc., a leading kidney care provider joined forces to launch the "Introduction to Nephrology Nursing" curriculum as a part of the Practice Ready Specialty Focused initiative at one of its institutions, Chamberlain University.

Designed to prepare pre-licensure nursing students for careers within the industry's most in-demand fields, the PRSF program introduces students to healthcare specialty options available with one-on-one clinical experiences with practicing nurses before graduation.

During the fiscal year ended June 30, 2023, ATGE’s revenue rose 5% year-over-year to $1.45 billion. Its adjusted operating income rose 7.5% year-over-year to $287.57 million. The company’s adjusted net income increased 26.4% year-over-year to $192.20 million.

Additionally, its adjusted earnings per share came in at $4.21, representing an increase of 35.4% year-over-year, and adjusted EBITDA for the quarter increased 4.5% year-over-year to $343.44 million.

Analysts expect ATGE’s EPS and revenue to rise 2.5% and 2.1% year-over-year to $4.31 and $1.48 billion in the fiscal year ending June 2024. It surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.

The stock has gained 21.8% year-to-date to close the last trading session at $43.22.

It’s no surprise that ATGE has an overall A rating, equating to a Strong Buy in our POWR Ratings system.

It has a B grade for Growth, Value, and Quality. It is ranked #2 in the same industry.

To access ATGE additionally for Momentum, Stability, and Sentiment, click here.

Stock #1: Perdoceo Education Corporation (PRDO)

PRDO provides postsecondary education through online, campus-based, and blended learning programs in the United States. The company operates in two segments, Colorado Technical University and The American InterContinental University System.

PRDO’s 84.29% trailing-12-month gross profit margin is 137.8% higher than the 35.45% industry average. Its trailing-12-month net income margin of 17.50% is 296.3% higher than the 4.42% industry average.

On September 15, PRDO paid the first quarterly dividend as part of the dividend policy of $0.11 per share. The company pays an annual dividend of $0.44, that translates to a yield of 2.63% on the current market price.

PRDO’s total revenues for the second quarter ended June 30, 2023, increased 11.3% year-over-year to $186.56 million. Its adjusted operating income rose 31.5% year-over-year to $55.17 million. The company’s net income rose 112.2% year-over-year to $54.67 million. In addition, its adjusted EPS increased 45.2% year-over-year to $0.61.

Street expects PRDO’s EPS for the quarter ending September 30, 2023, to increase 25.6% year-over-year to $0.49. It also surpassed the Street EPS and revenue estimates in each of the trailing four quarters.

Over the past year, the stock has gained 71.4% to close the last trading session at $17.36.

PRDO’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It has an A grade for Quality and a B for Value and Sentiment. It is ranked first in the same industry.

Beyond what we stated above, we also have given PRDO grades for Growth, Momentum, and Stability. Get all the PRDO ratings here.

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ATGE shares were trading at $42.83 per share on Tuesday morning, down $0.39 (-0.90%). Year-to-date, ATGE has gained 20.65%, versus a 13.12% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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