An education services business, comprised of:
- University Partnerships (think pathway programs) -- 65% of revenues
- Careers and industry (vocational type training, with an emphasis on Audio Engineering and Professional & English programs) -- 35% of revenue.
It is mostly in Australia, about 2/3 of sales, and has operations in the US, UK, Europe among others.
A good overview at the end of the recent results presentation (here)
Undeniably, there is a rising demand for education, and Navitas have a long standing presence in this space. It's a capital light business that can leverage well off rising enrollments.
Nevertheless, there are plenty of regulations to navigate through, and these can change unexpectedly and significantly. The business has had to close down some sub-par operations in the US of late, and there have been previous offerings that have failed to gain traction.
Shares have traded between $4 and $6 for the past 4 years, and are now at the very bottom of that range. Sales have also basically moved sideways in that period.
With today's writedowns and rationalisation plans, and factoring in the $130m in associated costs, I think it tough to ascribe too high a PE to this stock.
Assuming a return to some modest growth in the years ahead, and using an 20cps normalised estimate of current earnings power, I think $3.50 is about as much as I'd be prepared to pay.
Would be keen to hear a Bull Case if anyone thinks I'm missing something.
