Why Perdoceo Education (PRDO) Is Back In The Spotlight

Perdoceo Education (PRDO) has just reported its third quarter results, with revenue of US$215.86 million and net income of US$44.39 million, drawing new attention to the stock.

Perdoceo Education’s recent beat on earnings and the South University acquisition announcement have arrived during a rough patch for the stock, with the 30 day share price return down 16.5% and the 90 day move lower by 20.6%, even though the 5 year total shareholder return is 176.9%.

Compare Perdoceo Education’s latest move with a curated set of education and training peers by scanning 19 high quality undiscovered gems for other under the radar operators with solid fundamentals.

Perdoceo Education recently reported stronger earnings while the share price has been sliding. Does that create a reasonable entry point now, or is it better to hold back and wait for a cheaper valuation to appear?

Most Popular Narrative: 71% Undervalued

On the most followed valuation view, Perdoceo Education’s shares are priced far below the implied worth. The narrative fair value of $91.64 sits well above the recent close at $26.88, which puts a sharp spotlight on how investors are treating the business today.

Perdoceo Education trades below the value implied by discounting its own free cash flow. Using a two-stage model running 10 years of +17.7% growth fading to a 2.5% terminal rate and discounted at 9.8%, the shares are valued at USD 91.64 against a market price of USD 32.91. This equates to a 64% discount, or +178% to fair value. In this model, 56% of that value sits in the terminal period, which is the key caveat: the further out the cash flow, the more the result reflects assumptions rather than conditions in the current year.

See why 2 investors see Perdoceo Education as 71% undervalued.

Result: Fair Value of $91.64 (UNDERVALUED)

Still, the narrative leans heavily on long term cash flow assumptions and high terminal value, so weaker growth or a higher required return could quickly shrink that gap.

Find out about the key risks to this Perdoceo Education narrative.

Next Steps

Mixed signals like this call for your own judgment. Move fast, pull up the numbers, and review the 4 key rewards.

Looking for more Perdoceo Education style investment ideas?

If you stop with Perdoceo Education, you risk missing other opportunities. Put a few minutes into fresh ideas now instead of wondering what slipped past later.

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