Online education was among the industries that benefited most from the pandemic. Government restrictions and safety concerns shifted the learning experience from the classroom to the home for millions of students and workers worldwide.
Since schools and offices have reopened, our dependency on remote learning solutions has lessened. In turn, many education stocks that got A’s for performance in 2020 and 2021 have failed to attract investors in the post-pandemic economy.
It’s time for us to go back to school.
Absent the unusual demand created by the pandemic, the online learning space cannot just survive but thrive in the years ahead. Global Market Insights projects that the worldwide e-learning market will grow at a 20% rate from 2022 to 2028. Increasing access to the Internet and computers is expected to allow more people to use e-learning platforms to earn degrees and complete corporate training modules.
Yet with so many companies competing to reach the head of the class, choosing winning education stocks is a brain teaser. When it comes to good long-term growth prospects, these three names make the grade.
What is an Undervalued Education Stock?
Universal Technical Institute, Inc. (NYSE: UTI) specializes in postsecondary education for students interested in a career as an automotive or marine technician. It offers in-person and virtual programs across 14 U.S. campuses under several brands, with the most recognizable being the NASCAR Technical Institute.
This is a company that withstands the test of time because it has been a leader in technical education for over five decades. It has not only survived the ups and downs of the economic cycle but actually grown in the process.
Most recently the growth strategy has been to acquire other technical schools to diversify its certificate and degree offerings as well as its geographical footprint. UTI’s latest takeover was Michigan-based MIAT College of Technology, which provides real-world training in several mechanical trades including welding, HVAC, aviation, and robotics and automation technology.
A relentless pursuit of growth makes UTI stand out among publicly traded education companies. It is a big part of the reason why the Street is unanimously bullish on the stock. Workers will be looking for ways to expand their skill set in an increasingly competitive labor market. Many will be enrolling in UTI’s expanding lineup of programs.
Will Adtalem Global Education Stock Go Up?
Adtalem Global Education Inc. (NYSE: ATGE) is more of a jack-of-all-trades, although it focuses mostly on offering degree programs in the healthcare sector. Chamberlain University, Ross University, and the recently acquired Walden University are some of the most popular institutions for people seeking careers in the medical field. As such, healthcare organizations routinely rely on Adtalem to supply them with talented professionals.
Given the growth expected in areas like medicine, nursing, and veterinary care, demand for Adtalem’s degree and non-degree programs should be robust for years to come. And with more and more people opting to seek degrees while working part-time jobs or raising families, much of the demand will be centered around e-learning. Adtalem is positioning its portfolio in anticipation of this trend.
After acquiring Walden University from Laureate Education, the company has more than 100 certificates and degree programs for students to choose from. The programs are offered on-campus, hybrid, and online and are considered among the best in their respective fields. This has Adtalem prepared to be one of the world’s top providers of doctors and nurses.
After topping $1 billion in revenue last year, Adtalem is expected to derive steady top and bottom line growth over the next few years. The stock is recovering nicely from its 2022 low and, given the inexpensive 12x P/E, has plenty of room to run.
Will Strategic Education Stock Recover?
Shares of Strategic Education, Inc. (NASDAQ: STRA) have declined steadily since their early pandemic run to nearly $190. Now trading around $70, the company is an attractive takeover candidate for one but also has the potential to recover.
Strategic Education, or SEI, is the parent company of Strayer University and the New York Code and Design Academy (NYCDA). The former is a private college located in the Washington D.C. area whose roots go back to 1892 when it was Strayer’s Business College. Today it offers a wide range of accredited degrees online and on-campus. NYCDA is a leading education destination for people interested in web and software development training.
Lately, student enrollment and financial results have been down at SEI. With the jobs market strong, many recent graduates contemplating business or IT careers have opted to join the workforce and postpone schooling plans. SEI seems to be getting hit by this trend more than peers because of the areas it specializes in.
Management in turn is treating the downturn as an opportunity to diversify its offerings and innovate. Buried in the recent disappointing results is a program called FlexPath which lets students leverage what they learn on the job to progress their knowledge bases and career paths. In Q1, FlexPath enrollment became a bigger part of U.S. higher education enrollments and is being positioned to become a key growth engine for the company.
Outside of its core institutions, SEI’s umbrella includes the Sur La Table online culinary school and Hackbright Academy, an engineering school for women that provides talent to companies like Google and Airbnb. It is branching into similarly unique offerings to appeal to modern students that are interested in less traditional post-secondary education routes.
SEI has some work to do to win back investors but is heading in the right direction. Aside from expanding its product set, stock buybacks and a 3.4% dividend yield are good first lessons.