Stock Story -
Higher education company Perdoceo Education (NASDAQ:PRDO) reported results ahead of analysts' expectations in Q2 CY2024, with revenue down 10.6% year on year to $166.7 million. It made a non-GAAP profit of $0.60 per share, down from its profit of $0.61 per share in the same quarter last year.
Is now the time to buy Perdoceo Education? Find out by reading the original article on StockStory, it's free.
Perdoceo Education (PRDO) Q2 CY2024 Highlights:
- Revenue: $166.7 million vs analyst estimates of $160.9 million (3.6% beat)
- EPS (non-GAAP): $0.60 vs analyst estimates of $0.58 (3.4% beat)
- EPS (non-GAAP) Guidance for Q3 CY2024 is $0.53 at the midpoint, roughly in line with what analysts were expecting
- EPS (non-GAAP) Guidance for the full year is $2.19 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 83.5%, in line with the same quarter last year
- Free Cash Flow of $38.53 million, down 27.7% from the previous quarter
- Market Capitalization: $1.66 billion
Education ServicesA whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last five years, Perdoceo Education grew its sales at a weak 1.8% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Perdoceo Education's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.6% annually.
This quarter, Perdoceo Education's revenue fell 10.6% year on year to $166.7 million but beat Wall Street's estimates by 3.6%. We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Perdoceo Education has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company's free cash flow margin averaged 20.5% over the last two years, quite impressive for a consumer discretionary business.
Perdoceo Education's free cash flow clocked in at $38.53 million in Q2, equivalent to a 23.1% margin. The company's cash profitability regressed as it was 9 percentage points lower than in the same quarter last year, but it's still above its two-year average. We wouldn't put too much weight on this quarter's decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.
Key Takeaways from Perdoceo Education's Q2 ResultsIt was good to see Perdoceo Education beat analysts' revenue expectations this quarter. We were also happy its EPS narrowly outperformed Wall Street's estimates. Zooming out, we think this was a decent quarter, showing the company is staying on target. Investors were likely expecting more, and the stock traded down 2.6% to $24.20 immediately following the results.
