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Strategic Education Q3 Earnings: Time To Buy Struggling NasdaqGS:STRA Stock?

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Strategic Education, Inc. (NasdaqGS:STRA) is scheduled to report Q3 earnings results before markets open for trading on November 5, 2020.

The company is expected to report earnings of $1.20/share on revenue of $241.1 million. The consensus earnings per share (EPS) of $1.20/share is based on a poll of 4 analysts and represents a decline in eps of −6.4% over the same quarter last year, when the company reported earnings of $1.28/share.

The revenue forecast of $241.1 million based on a poll of 4 analysts implies a year-over-year (YoY) decline in revenue of −0.3%. Last year the company reported $241.7 million in revenue for the quarter.

Expected to report EPS contraction of −6.4% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $241.13 $241.75 −0.3%
EPS $1.20 $1.28 −6.4%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Strategic Education, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.69 $2.06 21.7% Beat
Q1, 2020 $1.99 $2.11 6.0% Beat
Q4, 2019 $2.05 $2.13 3.7% Beat
Q3, 2019 $1.20 $1.28 6.7% Beat
Q2, 2019 $1.47 $1.59 8.3% Beat
Q1, 2019 $1.43 $1.66 16.1% Beat
Q4, 2018 $1.50 $1.56 4.3% Beat
Q3, 2018 $0.68 $0.92 35.3% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −17.9%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 29, 2020 $163.66 $134.40 −17.9% Decline
April 29, 2020 $150.15 $159.30 6.1% Increase
February 28, 2020 $146.22 $147.38 0.8% Increase
November 7, 2019 $122.09 $133.88 9.7% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.87, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.87 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Strategic Education, Inc. is currently trading at $83.37/share, down −7.4% for the day. The company is trading at approximately 44.8% of its 52-week high of $187.97/share. The company’s stock price is down −38.0% since the last earnings report and down −13.2% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 38.22 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:STRA Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 17.61 and a forward P/E multiple of 14.16.

Strategic Education, Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.36. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $83.37
P/E Ratio 17.6x
P/E Ratio (Fwd) 14.2x
PEG Ratio 0.0
Total Debt / Total Capital 4.5%
Levered Free Cash Flow $165.7 million
EV / EBITDA 6.1x

Finbox

Strategic Education, Inc. is a mid-cap stock with a market capitalization of $2.177 billion and a total enterprise value of $1.754 billion. The company operates in the Consumer Discretionary sector and the Diversified Consumer Services industry.

Strategic Education, Inc., through its subsidiaries, provides a range of post-secondary education and non-degree programs in the United States. The company operates through three segments: Strayer University, Capella University, and Non-Degree Programs. It operates Strayer University that provides undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, public administration, and criminal justice for working adult students through its 77 physical campuses located in the eastern United States, as well as through online; and an executive MBA online through its Jack Welch Management Institute. The company also operates Capella University, an online post-secondary education company, which offers various bachelor’s, master’s, and doctoral degree programs in public service leadership, nursing and health sciences, psychology, business and technology, counseling and human services, and education primarily for working adults. In addition, it is involved in the operation of a software development school that provides Web Development, iOS development, and UX design programs in person at classrooms in Lehi, Utah, Dallas, Texas; and Phoenix, Arizona, as well as through online. Further, the company operates a software engineering school for women, which offers software development programs in person through classrooms in the San Francisco Bay area; and provides non-degree Web and application software development courses, as well as self-paced online learning courses. It offers its non-degree programs primarily for workers and their employers. Strategic Education, Inc. was founded in 1892 and is headquartered in Herndon, Virginia.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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