Plenty has been written on the three JSE-listed education stocks, ADvTech (ADH), Stadio (SDO) and Curro (COH). Indeed, I’ve written plenty myself over here (Pick of the education stocks) and chatted about them here (Education stocks offer strong potential).
But how do they all stack up currently? Who is outperforming whom? How are the current valuations lying relative to each other?
Currently, ADvTech is the clear winner of the pack, and this outperformance becomes more obvious the longer the time period you compare these stocks’ relative movements over:
Education Stocks’ Relative Share Prices:
Source: Google Finance
In short, ADvTech is schooling the other education stocks.
But is ADvTech’s stock still attractive? Has its valuation not re-rated beyond the others? Is it not growing slower than these younger companies?
The below table is quite revealing, particularly when comparing ADvTech’s Tertiary side to Stadio and ADvTech’s Schooling side to Curro, including revenue growth and various bottom-line growth metrics:
| Stocks: | Latest Enrolment Growth (%) | Latest Revenue (%) | Latest Update “Normalized” Profit Growth (%) | Price Earnings (x) |
| ADvTech (Only Schooling) | +4% y/y | +13% y/y | +18% y/y Operating Profit | – |
| Curro | +3% y/y | +16% y/y | +11% y/y ~ +21% y/y Recurring HEPS | 16.4x |
| ADvTech (Only Tertiary) | +7% y/y | +10% y/y | +16% y/y Operating Profit | – |
| Stadio | +8% y/y | +16% y/y | +14% y/y ~ 24% y/y Core HEPS | 22.4x |
| ADvTech (Full Group) | +6% y/y | +13% y/y | +13%y/y ~ +18% y/y Basic Normal EPS | 17.5x |
Sources: Various company reports
What is clear from the above is:
- ADvTech’s schooling is growing faster than Curro’s in every aspect,
- ADvTech’s tertiary side is growing slightly slower than Stadio’s, but not by much, &
- Despite the above, ADvTech’s share’s Price Earnings is well below Stadio’s and more or less in line with Curro’s.
Put differently, by investing into ADvTech, an investor would be getting a faster growing schooling business and a reasonably-fast-growing tertiary education business, but without any significant premium in the valuation being paid. In fact, arguably a discount embedded into this valuation…
In short, I think that this sector still offering broad appeal on the JSE and all three of these stocks are well-run and well-positioned without demanding valuations. But, specifically, ADvTech still stands out as the best quality in the sector and, relative to the other two, the best value at these levels. Finally, a shout out to the two other listed companies that hold investments in the education space. Go and check out the investments by Trematon Capital’s (TMT) in Generation Education and Astoria Investments (ARA) into ISA Carstens. While just an individual investment within each of these two respective investment companies’ portfolios, both ISA Carstens and Generation Education both play in well-defined niches that hold their own appeal.
ORIGINALLY APPEARED ON MONEYWEB