Can These Education Based Stocks Enlighten your Portfolio?

Tuesday, May 2nd, 2017

Bed Bath and Beyond (BBBY): BUY
The company does a great job presenting dorm room supplies for college students. This has not translated to an improving stock price as it’s been under pressure of late, but a value opportunity may have now presented itself. The current P/E multiple of 8.4 falls well below the industry average of 52.5; Price/Sales of 0.5 is below the industry average of 0.8; Price/ Tangible Book Value of 2.8 is below the industry average of 8.6; and Price/Cash Flow of 5.8 is below the industry average of 10.3. The balance sheet also appears to be strong as the company has plenty of liquidity with a current ratio of 1.9 and a reasonable Debt/Equity of 54.9%. Looking forward to February 2019 estimated EPS of $4.37 gives us a target sell price of $72.11.

Best Buy (BBY): Buy
Since technology is an important part of education, Best Buy offers great technological resources for students. This company has a great balance sheet as the current ratio of 1.5 provides liquidity and Debt/Equity of 29.0% shows the company has its leverage under control. Over the last 12 months BBY has been running an extremely effective business with Return on Capital of 18.1 and Return on Equity of 26.6. Sales have been under some pressure over the last 12 months as they were down 0.3%, but EPS over that time frame was up a substantial 61.1%. Looking forward to January 2019 estimated EPS of $3.93 gives us a target sell price of $64.85.

Office Depot (ODP): Buy
The valuation measures for this company are a major strength. The P/E of 3.99 is well below the industry average of 52.5. This does appear to be a result of accounting policies or a onetime event as EPS jumped 697.1% over the last 12 months. Price/Sales also looks good at 0.25 as it is below the industry average of 0.77. This is important to look at as accounting policies cannot affect sales. Price/Tangible Book Value of 1.9 is well below the industry average of 8.6 and Price/Cash Flow of 3.3 is also favorable to the industry average of 10.3. The balance sheet looks good as there is a current ratio of 1.46 and Debt/Equity is 64.0%. Looking forward to December 2018 estimated EPS of $0.51 would give us a target sell price of $8.42.  

DeVry Education (DV): Hold
The balance sheet is a strength for this company as it has a current ratio of 1.3 and Debt/Equity of 14.0%. The valuation ratios for DeVry appear to be a little stretched. The current P/E of 29.8 is below the industry average of 34.8, but both these levels are more than we like to pay for the earnings of a company. Price/Cash Flow of 14.2 is above the industry average of 11.8 and Price/Tangible Book Value of 7.2 is expensive. Looking forward to June 2018 estimated EPS of $2.79 would give us a target sell price of $46.04

Grand Canyon Education (LOPE): SELL
The company provides approximately 200 graduate and undergraduate degree programs across online programs and its campus in Phoenix, Arizona. Sales over the last 12 months are up 12.2%, while EPS has climbed 13.4% during that same time frame. A profit margin of 17.0% is extremely strong, especially when compared with the industry average of 5.8%. The company has little debt on the balance sheet and has Debt/Equity of just 12.7%. Although the company has been doing many great things, the stock price has run up tremendously over the past year and appears to now be overvalued. Looking forward to December 2018 estimated EPS of $3.81 would give us a target sell price of $62.87.

Bridgepoint Education (BPI): SELL
The company offers approximately 1,200 courses and 80 degree programs through its academic institutions of Ashford University and University of the Rockies. The balance sheet looks to be one of the only highlights for the company, as it has a current ratio of 2.8 and no debt. There is currently no P/E and no Price/Cash Flow as they are both not material. Sales have fallen by 6.2% over the last 12 months and EPS has climbed by 57.7% during the same time frame. Most likely this EPS growth is due to accounting policies rather than an improvement in reoccurring events. Looking forward to December 2018 estimated EPS of $0.29 would give us a target sell price of $4.79.


Do you have a question or a company you'd like us  to take a look at? Email us at Brent@WilseyAssetManagement.com or Chase@WilseyAssetManagement.com.

 

Brent Wilsey is president of Wilsey Asset Management and can be heard every Saturday at 8am and Sunday at 5pm on KFMB AM760.  Chase is a financial analyst for Wilsey Asset Management and can be heard every Saturday at 8am and Sunday at 5pm on KFMB AM760 as the co-host for the Smart Investing show with his father Brent Wilsey. Information is provided by Reuters.