Fundamental analysis
Adtalem is a company that operates several educational institutions with a focus on retraining workers and also operates universities providing bachelor’s, master’s and doctoral degrees. Adtalem’s main focus is medicine and workers in the medical environment (doctors, nurses, support staff, staff who care for elderly patients, etc.).
The company changed its name from DeVry Education to Adtalem in 2017. It traces its roots back to 1973 and was formed into its current form through mergers and acquisitions of its competitors.
Adtalem operates 5 universities and 27 campuses. It has more than 85,000 students in over 150 programs. Approximately 90% of the students are medical students.
ATGE has nearly doubled its sales to $1.5 billion in the last 4 years. For 2023, the profit was $93 million, and in 2022, the profit was $311 million.
EBITDA for 2023 is $319 million.
Since Adtalem sells mainly services, it has a high gross margin of18%.
Results
In 2Q 2024, the company’s sales grew 8.4% to USD 393 million.
The total number of students increased to 81,772 (+6.2%).
The company completed a $300 million share buyback that began in 2022.
In addition, the Board of Directors approved a new share buyback of USD 300 million again with a target year of 2027.
The Company repaid the $50 million loan, further reducing the interest on the remaining $253 million loan.
Operating profit was USD 393 million. Net income was USD 39.9 million (2Q 2023 was USD 24 million).
ATGE focuses on retraining programs for future nurses. It is celebrating success with a new program, registering 1,100 new students in the last 3 months.
Technical analysis
The stock price has risen 85% over the past year.
The moving averages have only crossed into an uptrend since May 2024. The stock has rallied strongly in recent weeks, signified by the stretched spread between the moving averages and also the RSI, which has broken the 70 level twice strongly.
The current short correction, which is still well above the nearest support at $62 per share, has sent the RSI sharply lower.
Conclusion
Adtalem is a smaller company yet can offer interesting appreciation. Demand for educational services is driving. The bet on education in the hospital segment is paying off.
However, the stock is growing in leaps and bounds, which may not be suitable for investors looking for lower risk or more stable growth.
If the stock falls even lower and doesn’t break support at the $62 price, it could reverse. It’s possible that the RSI will get into the oversold zone as well, which would be another buy signal.
But since the stock is quite volatile, it is also possible that it will continue to correct below the support at the $62 price. It was trading at half of its current value ($40 per share) back in April, which wasn’t that long ago.