Adtalem (ATGE) Surges 52% In A Year, Outperforms Industry

Amid intense competition in the school industry, Adtalem Global Education Inc. (NYSE:ATGE) has fared impressively and emerged as an attractive investment option. This is evident from the stock’s performance in a year. Shares of the company have surged 52%, against the industry’s 12% decline.

The company continues to focus on new student enrollment growth through enhanced program offerings. Moreover, the company is undertaking several cost-saving initiatives to achieve sustainability in EPS growth over the long term. Upward revisions in earnings estimates for 2018 reflects analysts’ optimism the stock’s future earnings potential. In the past month, earnings estimates for the year have inched up 2.2%.

Let’s delve deeper and discuss the factors that are driving this Zacks Rank #2 (Buy) company.

Hidden Catalysts

The company aims at meeting students’ preference and employers’ requirements by introducing short-term programs that are expected to drive enrollments. In fact, in the first quarter of 2019, the company witnessed new student enrollment growth of 19.7% and total student enrollment growth of 3.6% from the prior-year quarter’s levels. Especially in Brazil, the company experienced 24% improvement in enrollment with new students.

Meanwhile, distance learning programs saw an enrollment increase of approximately 9.5%. Moreover, the company posted strong enrollment growth in the Technology and Business segment in the quarter under review on the back of major growth in Wyden Online — a distance learning program. Thus, Adtalem’s focus on building strong brand awareness and increasing total enrollment will drive growth.

Further, Adtalem’s health care and international institutions have shown significant improvement in revenues and profitability since fiscal 2013. New student enrollment in Chamberlain, a health care institution, was solid in the Sep 2018 session. The figure improved 9.5% from the year-ago period’s levels. Looking forward to fiscal 2019, the company expects mid-single-digit new student enrollment growth at Chamberlain.




The company has plans of capitalizing on the supply demand imbalance in nursing and the broader healthcare industry by investing in new programs in markets with maximum demand. In fact, the company is optimistic about the demand trend in the medical and healthcare segments from students as well as employees.

However, the company is subject to regulatory risks related to federal student financial aid programs, known as Title IV program. If the company fails to comply with the prescribed rules of the program, its institutions may lose eligibility to participate in Title IV funds.

Other Stocks to Consider

A few other top-ranked stocks in the industry are K12 Inc. (NYSE:LRN) , RYB Education, Inc. (NYSE:RYB) and Bright Horizons Family Solutions Inc. (NYSE:BFAM) . While K12 and RYB Education sport a Zacks Rank #1 (Strong Buy), Bright Horizons Family carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

K12 surpassed earnings estimates in three of the past four quarters, the average positive surprise being 37%.

RYB Education has an expected sales growth rate of 16.5% for the current year.

Bright Horizons Family has an expected earnings growth rate of 17.1% for the current year.

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