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Bright Horizons Family Solutions Q3 Earnings: Is NYSE:BFAM Expensive at 181.1x Forward P/E?

in EARNINGS/INVESTING IDEAS by

Bright Horizons Family Solutions Inc. (NYSE:BFAM) is scheduled to report Q3 earnings results after markets close for trading on November 5, 2020.

The company is expected to report earnings of -$0.49/share on revenue of $312.5 million. The consensus earnings per share (EPS) of -$0.49/share is based on a poll of 9 analysts and represents a decline in eps of −157.4% over the same quarter last year, when the company reported earnings of $0.86/share.

The revenue forecast of $312.5 million based on a poll of 5 analysts implies a year-over-year (YoY) decline in revenue of −38.9%. Last year the company reported $511.6 million in revenue for the quarter.

Expected to report EPS of -$0.49/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $312.51 $511.58 −38.9%
EPS -$0.49 $0.86 −157.4%

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, missed 1 quarter, and met expectations 2 quarters.

What are your expectations from Bright Horizons Family Solutions Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.58 $0.44 175.7% Beat
Q1, 2020 $0.75 $0.74 −1.4% Missed
Q4, 2019 $0.97 $1.01 4.4% Beat
Q3, 2019 $0.86 $0.86 0% Met
Q2, 2019 $0.98 $0.99 0.9% Beat
Q1, 2019 $0.79 $0.81 2.4% Beat
Q4, 2018 $0.84 $0.90 7.5% Beat
Q3, 2018 $0.73 $0.73 0.0% Met

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 increasing 10.8%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $111.50 $123.55 10.8% Increase
May 6, 2020 $121.15 $112.61 −7.0% Decline
February 13, 2020 $171.96 $172.32 0.2% Increase
October 30, 2019 $147.12 $148.52 1.0% 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 −1.62, the model suggests that the company is likely an earnings manipulator. A value of −1.62 implies a 5.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

Bright Horizons Family Solutions Inc. is currently trading at $158.13/share, down −1.2% for the day. The company is trading at approximately 89.6% of its 52-week high of $176.98/share. The company’s stock price is up 28.0% since the last earnings report and down −4.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 61.49 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:BFAM Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 80.07 and a forward P/E multiple of 181.06.

Bright Horizons Family Solutions Inc.’s current share price also implies a price-to-book (P/B) multiple of 7.99. 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) $158.13
P/E Ratio 80.1x
P/E Ratio (Fwd) 181.1x
PEG Ratio −2.7
Total Debt / Total Capital 16.1%
Levered Free Cash Flow $94.934 million
EV / EBITDA 35.4x

Finbox

Bright Horizons Family Solutions Inc. is a mid-cap stock with a market capitalization of $9.665 billion and a total enterprise value of $11.254 billion. The company operates in the Consumer Discretionary sector and the Diversified Consumer Services industry.

Bright Horizons Family Solutions Inc. provides child care and early education services, back-up care services, educational advisory services, and other workplace solutions for employers and families. The company operates through three segments: Full Service Center-Based Child Care, Back-Up Care, and Educational Advisory Services. The Full Service Center-Based Child Care segment offers traditional center-based child care, preschool, and elementary education services. The Back-Up Care segment provides center-based back-up child care, and in-home child and adult/elder dependent care services. The Educational Advisory Services segment offers tuition assistance and student loan repayment program administration, and related educational consulting services, as well as college admissions advisory services. As of December 31, 2019, it operated 1,084 child care and early education centers in the United States, Puerto Rico, the United Kingdom, Canada, the Netherlands, and India. The company was formerly known as Bright Horizons Solutions Corp. and changed its name to Bright Horizons Family Solutions Inc. in July 2012. Bright Horizons Family Solutions Inc. was founded in 1986 and is headquartered in Watertown, Massachusetts.

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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