Higher education company Strategic Education (NASDAQ:) reported first-quarter 2024 results that beat analysts’ expectations, with revenue up 13.1% year over year to $290.3 million. Non-GAAP earnings of $0.24 per share unchanged. compared to the same period last year.
Is now the time to buy strategic education? Find out by reading the original article on StockStory, it’s free..
Strategic Education (STRA) Q1 2024 Highlights:
- Income: $290.3 million vs. analyst estimates of $274.3 million (5.8% increase)
- earnings per share (non-GAAP): $0.24 vs. analysts’ estimates of $0.58 (-$0.34)
- Gross Profit (GAAP): 45.7% compared to 40.4% in the same quarter last year.
- Free Cash Flow $68.44 million compared to $16.39 million in the prior-year quarter.
- Enrolled students: 87 731
- Market capitalization: $2.45 billion
Formed by merger Strayer Education and Capella Education in 2018, Strategic Education (NASDAQ:STRA) is a career-focused higher education provider.
Educational services. To address rising education costs, an industry has emerged to offer consumers alternatives to traditional forms of education such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those who have jobs or child-rearing responsibilities. However, some have faced challenges related to the value of the degrees and certificates they provide and whether clients are getting a good deal. Those who don’t prove their worth may struggle to retain students or, worse, face the heavy hand of regulation.
Sales Growth A company’s long-term performance can signal the quality of its business. Any business can last a good quarter or two, but many resilient companies need years of growth. Strategic Education’s annual revenue growth rate of 8.8% over the past five years has been weak for a consumer business. At consumer discretion, product cycles are short and revenues may decline due to rapidly changing trends. That’s why we also keep an eye on short-term performance. Strategic Education’s recent history shows that business has slowed, with annual revenue growth of 2.9% over the past two years below the five-year trend.
remove advertising
.
For the quarter, Strategic Education reported robust year-over-year revenue growth of 13.1%, with revenue of $290.3 million beating Wall Street estimates by 5.8%. Looking ahead, Wall Street expects sales to grow 3.3% over the next 12 months, down from this quarter.
Cash Is Critical While profits are certainly important in assessing a company’s performance, we believe cash is critical because you can’t use accounting profits to pay bills.
Over the past two years, the strategic entity has delivered mediocre cash returns, putting the company in a difficult position as it gives the company limited ability to reinvest, pay down debt or return capital to shareholders. Free cash flow margin averaged 8.3%, which is below average for a consumer discretionary business.
Strategic Education reported free cash flow of $68.44 million in the first quarter, representing a margin of 23.6% and up 154% year over year. Analysts’ consensus estimates are that they expect Strategic Education’s LTM free cash flow margin of 10.4% to remain unchanged over the next year.
Key takeaways from first quarter strategic education results
We were impressed by how significantly Strategic Education beat analysts’ EPS expectations for the quarter. We were also encouraged that its revenue and operating margin exceeded expectations, driven by higher-than-expected global student enrollment and employer-linked student enrollment in its education technology services segment.
Strategic Education also declared a quarterly dividend of $0.60 per share, payable to shareholders on June 3, 2024, as of May 24, 2024.
Zooming out, we think this was a great quarter that shareholders will appreciate. The stock rose 7.3% following the report and is currently trading at $108 per share.
remove advertising
.