Grand Canyon Education, Inc. (LOPE) continues to trade just a pinch below its 52-week high on the company’s excellent Q1 results from early May that included a 62% jump in revenue from last year. But in spite of the gains, shares still trade at a discount to its peers, with a bullish 34% next-year growth projection to boot.
Company Description
Grand Canyon Education, Inc. provides online post secondary education services in the United States. The company has about 40,000 enrollees, was founded in 1949 and has a market cap of $1.8 billion.
With the cost of a traditional college degree getting even more ridiculously expensive every year, private educational providers have fallen into favor as a legitimate option to launch someone’s career. That paradigm shift has been a boon to the industry, recently on display when Grand Canyon reported better than expected Q1 results that contained a 25% earnings surprise.
First-Quarter Results
Revenue for the period was up an amazing 61% from last year to $89 million. Earnings also came in strong at 25 cents, 25% ahead of the Zacks Consensus Estimate. Grand Canyon has been running ahead of the curve for the last year, with an average earnings surprise of 23%.
The company’s great results were driven by a jump in enrollments, up 37% from last year to 38,900 students and improved operating leverage, where operating margin expanded 561 basis points to 21.9%.
Grand canyon also strengthened its balance sheet during the quarter, boosting its unrestricted cash and equivalents position to $98 million, compared to just $26 million in long-term debt.
Estimates Jump
With a good quarter in the bag and an optimistic tone from management, analysts went ahead and raised estimates. The current year added 5 cents to $1.24 while the next year gained 6 cents to $1.67, a bullish 34% growth projection.
In spite of the recent gains, shares of LOPE still look reasonably priced, trading with a forward P/E multiple of 21X, a slight discount to its peer’s 23X. The company’s P/B ratio of 11.94X is sharply higher than its peer average of 3.76X.
12-Month Chart
LOPE hit a new 52-week high in early April before pulling back a bit on general weakness. As it stands, shares are locked into a tight range just below the recent high, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service.
