American Public Education, Inc.

APEI Details

 

American Public Education, Inc. (NASDAQ: APEI) American Public Education, Inc. provides online and on-campus postsecondary education, it has three subsidiary schools that serve roughly 108,400 students: American Public University System (APUS), Rasmussen University (RU), and National Education Seminars, also known as Hondros College of Nursing (HCN). Course registrations and enrollments, teaching services, tuition, and other fees are how APEI makes money.

Latest News:

• Recent Partnership: American Military University Partners with 50strong to Help Connect U.S. Service Members to Potential Civilian Employment Opportunities, the company announced on May 3, 2022. 50strong works with military-ready employers and higher education partners like AMU to find chances for at-scale resources and exposure to private-sector enterprises.
• Board Appointment: APEI announced David Cumberbatch's appointment to its Board of Trustees on April 13, 2022. Cumberbatch, a seasoned education and technology executive, has led strategic development projects at consumer-facing organisations such as Microsoft, ACT Inc., and Stride, Inc., and currently serves as the Bill & Melinda Gates Foundation's Senior Advisor for K-12 Solutions.

Financial Highlights: Q1FY22 (ended March 31, 2022)

• Strong Revenue Growth: The company reported a 75% jump in revenue on a YoY basis to USD 154.7 million, largely driven by inclusion of USD 67.1 million revenue of Rasmussen University ("RU") segment and USD 3.1 million revenue of Graduate School USA ("GSUSA") segment, and partially offset by a decrease of USD 4.4 million, or 5.7%, in revenue from American Public University System ("APUS"). While enrollments increased 1.2%. APUS revenue declined primarily due to the timing of registrations within the quarter and lower revenue per net course registrations due to a change in mix to military registrations, which generate lower revenue per registration than non-military registrations
• Surge in Total Costs and Expenses: During the quarter under consideration, the company’s total costs and expenses increased to USD 149.5 million for 2022, compared to USD 77.9 million in 2021, primarily due to the inclusion of RU Segment and GSUSA costs and expenses for the three months ended March 31, 2022, of USD 66.2 million and USD 4.7 million, respectively. This had a weigh in the company’s profitability margin as well in the quarter just gone by.
• Moderate Bottom Line Performance: In Q1FY22, the company reported net income was USD 5.3 million, compared to net income of USD 8.1 million in Q1FY21, primarily on account of higher amortization of intangible assets and interest expense as a result of the RU acquisition, partially offset by the gain on acquisition related to the GSUSA acquisition.
• Balance Sheet Strength: As of March 31, 2022, the company’s Total cash and cash equivalents was approximately USD 170.9 million, an increase of 14.2%, compared to USD 149.6 million as of December 31, 2021. The increase in cash was due to cash provided by operating activities and USD 1.4 million of net cash received as a result of the GSUSA acquisition, partially offset by increases in capital expenditures and payments of principal and interest on debt obligations.

Key Risks:

The company is exposed to variety of risks ranging from risks related to attracting and retaining students, inability to effectively market their programs or expand into new markets, and continued strong competition in the postsecondary education market could impact their institutions’ market share and increase cost of acquiring student.

Q2 FY22 Guidance:

Outlook (Source: Investors Presentation, May 10, 2022)

Valuation Methodology: EV/Sales Multiple based Relative Valuation

(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:

APEI's stock price has fallen 36.10% in the past six months and is leaning towards the lower end of its 52-week range of USD 30.00 to USD 12.82. We have valued the stock using the EV/ Sales multiple-based relative valuation methodology and arrived at a target price of USD 16.43.

Several institutional investors and hedge funds have recently made changes to their positions in APEI. Denali Advisors LLC bought a new position valued at about USD 56,000. Marshall Wace LLP purchased a new stake valued at about USD 56,000. Lazard Asset Management LLC purchased a new stake valued at about USD 108,000. Canada Pension Plan Investment Board purchased a new stake valued at about USD 134,000. Finally, Allspring Global Investments Holdings LLC purchased a new during the fourth quarter valued at about USD 173,000. Also, Hedge funds and other institutional investors own 98.23% of the company's stock

Hence, considering the strong quarterly performance, financial guidance, business model, strategic acquisitions, high institutional ownership, associated risks, and current valuation, we recommend a "Speculative Buy" rating on the stock at the current market price of USD 13.71 as of May 24, 2022, at 08:05 AM PDT.

1 Year Technical Price Chart (as of May 24, 2022, at 08:05 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Summary Analysis

*Current Market Price as of May 25, 2022, at 08:05 AM PDT

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 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 unfavourable movement in the stock prices.

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 on 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. 

Note 3: The report publishing date is as per the Pacific Time Zone.

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