Perdoceo Education Corporation (PRDO) Hit a 52 Week High, Can the Run Continue?

When it comes to short-term investing or trading, they say "the trend is your friend." And there's no denying that this is the most profitable strategy. But making sure of the sustainability of a trend to profit from it is easier said than done.

The trend often reverses before exiting the trade, leading to a short-term capital loss for investors. So, for a profitable trade, one should confirm factors such as sound fundamentals, positive earnings estimate revisions, etc. that could keep the momentum in the stock alive.

Our "Recent Price Strength" screen, which is created on a unique short-term trading strategy, could be pretty useful in this regard. This predefined screen makes it really easy to shortlist the stocks that have enough fundamental strength to maintain their recent uptrend. Also, the screen passes only the stocks that are trading in the upper portion of their 52-week high-low range, which is usually an indicator of bullishness.

There are several stocks that passed through the screen and

Perdoceo Education

(PRDO) is one of them. Here are the key reasons why this stock is a solid choice for "trend" investing.

A solid price increase over a period of 12 weeks reflects investors' continued willingness to pay more for the potential upside in a stock. PRDO is quite a good fit in this regard, gaining 22.6% over this period.

However, it's not enough to look at the price change for around three months, as it doesn't reflect any trend reversal that might have happened in a shorter time frame. It's important for a potential winner to maintain the price trend. A price increase of 30.7% over the past four weeks ensures that the trend is still in place for the stock of this for-profit education company.

Moreover, PRDO is currently trading at 115.2% of its 52-week High-Low Range, hinting that it can be on the verge of a breakout.

Looking at the fundamentals, the stock currently carries a Zacks Rank #2 (Buy), which means it is in the top 20% of more than the 4,000 stocks that we rank based on trends in earnings estimate revisions and EPS surprises -- the key factors that impact a stock's near-term price movements.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

Another factor that confirms the company's fundamental strength is its Average Broker Recommendation of #1 (Strong Buy). This indicates that the brokerage community is highly optimistic about the stock's near-term price performance.

So, the price trend in PRDO may not reverse anytime soon.

In addition to PRDO, there are several other stocks that currently pass through our "Recent Price Strength" screen. You may consider investing in them and start looking for the newest stocks that fit these criteria.

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Zacks Investment Research

Net profit, also referred to as the bottom line, is one of the key tools to determine the financial health of an enterprise. The metric demonstrates a company’s ability to convert per-dollar sales into profits.

A low profit margin indicates higher risks, implying that a revenue drop might dampen profits, thus pushing a company into the red. Graham Corporation GHM, Qifu Technology, Inc. QFIN, Adtalem Global Education Inc. ATGE and Strategic Education, Inc. STRA, however, boast solid net profit margins.

Net Profit Margin = Net profit/Sales * 100

In simple terms, net profit is the amount a company retains after deducting all costs, interest, depreciation, taxes and other expenses. In fact, net profit margin can turn out to be a potent point of reference to gauge the strength of a company’s operations and its cost-control measures.

Also, higher net profit is essential for rewarding stakeholders. Further, strength in the metric not only attracts investors but also draws well-skilled employees who eventually enhance business value.

Moreover, a higher net profit margin compared with peers provides a company with a competitive edge.

Pros and Cons

Net profit margin helps investors gain clarity on a company’s business model in terms of pricing policy, cost structure and manufacturing efficiency. Hence, a strong net profit margin is preferred by all classes of investors.

However, net profit margin, as an investment criterion, has its share of pitfalls. The metric varies widely from industry to industry. While net income is a key metric for investment measurement in traditional industries, it is not that important for technology companies.

In addition, the difference in accounting treatment of various items — especially non-cash expenses like depreciation and stock-based compensation — makes comparison a daunting task.

Furthermore, for companies preferring to grow with debt instead of equity funding, higher interest expenses usually weigh on net profit. In such cases, the measure is rendered ineffective while analyzing a company’s performance.

The Winning Strategy

A healthy net profit margin and solid EPS growth are the two most sought-after elements in a business model.

Apart from these, we have added a few criteria to ensure maximum returns from this strategy.

Screening Parameters

Net Margin 12 months – Most Recent (%) greater than equal to 0: A high net profit margin indicates solid profitability.

Percentage Change in EPS F(0)/(F-1) greater than equal to 0: It indicates earnings growth.

Average Broker Rating (1-5) equal to 1: A rating of #1 indicates brokers’ extreme bullishness on the stock.

Zacks Rank less than or equal to 2: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environments.

VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

Here we discuss our four picks from the 26 stocks that qualified the screen:

Graham designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. The company's products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters and various types of heat exchangers. The stock currently sports a Zacks Rank of 1 and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Graham’s fiscal 2025 earnings has been revised upward by 8 cents to $1.03 per share in the past seven days. GHM surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 101.9%.

Qifu Technology is a credit-tech platform principally in China that provides a comprehensive suite of technology services to assist financial institutions and consumers and small & medium enterprises in the loan lifecycle, ranging from borrower acquisition, preliminary credit assessment, fund matching and post-facilitation services. The stock has a Zacks Rank of 1 at present and a VGM Score of B.

The Zacks Consensus Estimate for Qifu Technology’s 2024 earnings has been revised downward to $5.04 per share from $5.08 in the past 30 days. QFIN surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, the average surprise being 8.6%.

Adtalem Global Education is a leading healthcare education provider and workforce solutions innovator. Currently, the stock carries a Zacks Rank #2 and has a VGM Score of A.

The Zacks Consensus Estimate for Adtalem Global Education’s fiscal 2025 earnings has been revised upward by 9 cents to $5.81 per share in the past 30 days. ATGE surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 19.5%.

Strategic Education, through its subsidiaries Strayer University and New York Code and Design Academy (NYCDA), provides a range of post-secondary education and other academic programs in the United States. The stock currently carries a Zacks Rank of 2 and has a VGM Score of B.

The Zacks Consensus Estimate for Strategic Education’s 2024 earnings has been revised upward by 11 cents to $4.76 per share in the past seven days. STRA surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 40.4%.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks' portfolios and strategies are available at: https://www.zacks.com/performance_disclosure/.

Zacks Investment Research

American Public Education, Inc.’s APEI stock plunged 7.6% in the after-hour trading session after it reported mixed results for third-quarter 2024. Its earnings handily beat the Zacks Consensus Estimate and improved from the previous year.

Revenues missed the analysts’ expectations but increased year over year on the back of contributions from the American Public University System (“APUS”), Hondros College of Nursing (“HCN”) and Rasmussen University ("RU") segments. Yet, lower revenues from Graduate School ("GSUSA") partially offset the growth.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

APEI has been benefiting from consistent enrollment growth at APUS and HCN, along with improvement at RU, which saw its first enrollment growth in the third quarter since the acquisition of the business. The company expects to witness continued momentum across the segments in the fourth quarter.

Delving Deeper

APEI reported adjusted earnings per share (EPS) of 4 cents, beating the Zacks Consensus Estimate of 1 cent by 300% and increasing 100% from 2 cents reported a year ago.

American Public Education, Inc. Price, Consensus and EPS Surprise

American Public Education, Inc. price-consensus-eps-surprise-chart | American Public Education, Inc. Quote

Total revenues of $153.1 million missed the consensus mark of $153.6 million by 0.3% but grew 1.5% from the year-ago period on strong segmental results.

Total costs and expenses increased 3.2% year over year to $149 million. Adjusted EBITDA decreased 28.7% year over year to $12.9 million. Adjusted EBITDA margin of 8% contracted from 12% year over year.

Segment Discussion

APUS: Revenues of $77 million grew 0.8% from the year-ago period’s levels of $76.4 million. APUS has delivered consistent year-over-year growth in net course registrations driven by modest increases in registrations and targeted tuition and fees.

APUS’ total net course registration inched up 0.2% from the year-ago period to 92,500. Adjusted EBITDA margin of 29% contracted from 30% year over year.

RU: The segment reported revenues of $52.6 million for the quarter, up 1% from a year ago. The increase was primarily due to an increase in tuition rates effective in the first quarters of 2023 and 2024 for select programs. This was partially offset by a change in the mix of total student enrollment, resulting in a 6.3% decrease in on-ground enrollment, partially offset by a 4.2% increase in online enrollment, which has a lower revenue per student compared with the prior-year period.

RU’s total student enrollment remained flat year over year to 13,500. On-ground enrollment was 6,000, and online enrollment was 7,500 students. Adjusted EBITDA margin of negative 9% narrowed from negative 10% reported in the prior-year quarter.

HCN: The segment’s revenues rose 12.8% year over year to $15.5 million, backed by solid growth in tuition. Total student enrollment at HCN increased 10.4% from the prior-year quarter’s levels to 3,100. Adjusted EBITDA margin was negative 2%, flat year over year.

Corporate and other: It includes tuition and contract training revenues earned by GSUSA and eliminates intersegment revenues for courses taken by employees of one segment at other segments. The segment’s revenues decreased 14% year over year to $8.04 million impacted by government spending uncertainty. GSUSA revenues fell 6.3% year over year.

Adjusted EBITDA margin came in at negative 100% against 18% a year ago.

Financials

At the end of the third quarter, American Public had total cash, cash equivalents, and restricted cash of $162.2 million, up from $144.3 million at 2023-end.

Q4 Guidance

APEI expects total revenues to increase 4-8% year over year to $159-$164 million. It anticipates EPS between 47 cents and 56 cents, down 13-26% year over year. Adjusted EBITDA is expected to be within $23-$26 million, reflecting a decline of 10% to a growth of 2% year over year.

APUS’ total net course registrations are likely to be 94,400-96,100, reflecting 4-6% growth year over year. HCN’s total enrollment is expected to increase 19% from the prior-year figure to 3,700 students.

RU’s student enrollment is expected to be up 4% from the year-ago quarter’s figure of 14,600. On-ground student enrollment is likely to decline 3% to 6,300, while Online student enrollment is expected to rise 9% year over year to 8,300.

2024 Guidance Updated

APEI has reduced the upper limit of the previously guided range for total revenues to $620-$625 million from $620-$630 million. This reflects growth of 3-4% compared with previous range of 3-5% year over year.

The company has also narrowed its adjusted EBITDA guidance to $64-$67 million (compared with the prior projection of $60-$70 million), reflecting 7-12% growth (compared with the prior expectation of 1-17%) year over year.

Capital expenditures are now expected to be in the range of $19-$22 million, up from $17-$20 million expected earlier. The new range reflects 37-58% growth compared with 22-44% expected earlier.

Zacks Rank & Peer Releases

APEI currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Lincoln Educational Services Corporation LINC reported mixed results for third-quarter 2024. Its earnings missed the Zacks Consensus Estimate, but revenues topped the same.

Nonetheless, both metrics increased year over year, driven by a 10.6% increase in the average student population. This uptick resulted from four consecutive quarters of double-digit start growth and the recently opened East Point, GA campus, which generated $3.4 million in revenues in the third quarter.

Strategic Education, Inc. STRA, or SEI, reported impressive results for third-quarter 2024. Its quarterly earnings and revenues topped the Zacks Consensus Estimate and increased year over year.

The company witnessed strong employer affiliated enrollment in the U.S. Higher Education segment, strong growth from Sophia subscriptions in the Education Technology Services segment and another quarter of total enrollment growth in the Australia/New Zealand segment.

Adtalem Global Education Inc. ATGE posted better-than-expected results in first-quarter fiscal 2025. Earnings and revenues surpassed their respective Zacks Consensus Estimate and increased year over year, given strong enrollment growth and strategic initiatives.

ATGE raised its fiscal 2025 guidance, projecting revenues between $1.69 billion and $1.73 billion, reflecting confidence in sustained growth momentum.

Zacks Investment Research