Kalkine has a fully transformed New Avatar.
Company Overview: Grand Canyon Education, Inc. (NASDAQ: LOPE) is a for-profit education services company and currently offers its services to 27 university partners in the US. It also offers various support services in the post-secondary education sector using its technological solutions, infrastructure, and operational processes. Its services assist students and staff/faculty of partner universities in marketing, enrollments, counseling, financial services, technology, tech-support, compliance, human resources, classroom operations, content development, training and recruitment, etc.
LOPE Details
Key Takeaways from Q2FY21 (ended June 30, 2021)
Key Trends; Analysis by Kalkine Group
Relationship with GCU: LOPE's primary university partner is Arizona-based Grand Canyon University (GCU), a non-profit, regionally accredited university offering graduate and undergraduate degree programs through nine on-campus colleges and two off-campus colleges in offline and online modes.
On July 01, 2018, LOPE sold GCU to an independent non-profit corporation and signed an Asset Purchase Agreement (APA) with GCU, under which it was granted a 6% secured note due 2025 for USD 0.87 million in exchange for the transfer of certain related assets to GCU.
As a result of this sale and transfer, LOPE no longer operates any higher education institution or participates in Title IV programs.
Student Enrollments:
Other Key Findings in Q2FY21:
Balance Sheet & Liquidity Position
Key Metrics: In Q2FY21, LOPE's EBITDA and operating margins were 28.7% and 24.9%, higher than the industry median of 21.6% and 13.5%, respectively. ROE stood at 3.2%, at par with the Q2FY20 return. Debt/Equity was 0.08x as of June 30, 2021, vs. the industry median of 0.46x.
Leverage Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 49.43% of the total shareholding, while the top 4 constitute the maximum holding. The Vanguard Group, Inc. and BlackRock Institutional Trust Company, N.A. hold the maximum stake in the company at 9.36% and 7.71%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis
Outlook
Valuation Methodology: EV / EBITDA Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the last six months, LOPE corrected ~18.85%. The stock is currently trading in the mid-band of its 52-week range of USD 75.64 to USD 115.96. We have valued the stock using the EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price with an upside of high teens (in percentage terms). We believe that the company can trade at a discount compared to its peer average considering the concentration of revenue and alteration of business structure (in 2018). We have taken peers like Laureate Education, Inc. (NASDAQ: LAUR) and 2U, Inc. (NASDAQ: TWOU). Considering the decent top and bottom-line growth, higher investment in the business, low leverage, encouraging outlook, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 87.79, up ~0.35% as of August 25, 2021.
LOPE Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.