The digital education market has experienced significant growth in the past few years, driven by increasing adoption of online learning programs by organizations and institutions and rising internet penetration. Thus, investors could scoop up shares of fundamentally stable online learning stocks, Udemy, Inc. (UDMY), Graham Holdings Company (GHC), and Perdoceo Education Corporation (PRDO).

The shift in conventional education was largely boosted by the conditions of the pandemic. However, even after the world returned to its regular working state, this shift has yet to fade. Powered by organizations and educational institutions’ various programs themed around relevant skill training, the gears of online learning are grinding in full force.

With more than 90% of companies offering some form of digital learning opportunities to induce the growth of their employees, more and more companies are partnering up with specific education providers to achieve the same. Also, an estimated 98% of universities reported having some online classes, enhancing the prospects of the shift.

One of the major drivers of this shift has largely been the availability of robust internet and connectivity solutions worldwide. As of 2024, more than 5.35 billion people or 66.2% of the world population have used the internet. As the world becomes increasingly digital, the prospects of e-learning are set to thrive.

According to a study by Grand View Research, the global digital education market is expected to reach $133.73 billion by 2030, growing at an impressive CAGR of 31.5%.

Now let us dive deep into the fundamentals of three Outsourcing – Education Services stocks, starting with #3.

Stock #3: Udemy, Inc. (UDMY)

UDMY is a learning company that operates a marketplace platform for learning skills. It provides skill acquisition, development, and validation courses for organizations and individuals, through direct-to-consumer or Udemy Business offerings in various languages.

On October 22, 2024, UDMY announced new AI capabilities to aid organizations in creating dynamic and personalized learning programs at scale. With a growing popularity for corporate learning programs, the new AI offerings by UDMY could drive its user growth and enhance its market position in the digital education sector.

UDMY’s trailing-12-month gross profit margin of 61.14% is 63.3% higher than the industry average of 37.43%. Its trailing-12-month levered FCF margin of 14.74% is 225% higher than the sector average of 4.54%. Likewise, the stock’s trailing-12-month asset turnover ratio of 1.15x is 16.2% higher than the industry average of 0.99x.

For the fiscal 2024 third quarter that ended September 30, UDMY’s revenue increased 5.8% year-over-year to $195.42 million. Its non-GAAP gross profit rose 13.9% from the year-ago value to $125.29 million.

Additionally, the company’s non-GAAP net income and non-GAAP net income per share grew 30.1% and 40% from the prior year’s quarter to $10.06 million and $0.07, respectively.

Analysts expect UDMY’s revenue and EPS for the fiscal 2025 first quarter (ending in March) to increase 2.3% and 164.9% year-over-year to $201.39 million and $0.08, respectively. Moreover, the company has surpassed consensus revenue estimates in all four trailing quarters, which is impressive.

UDMY’s shares declined 4% intra-day to close the last trading session at $7.51.

UDMY POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

UDMY has a B grade for Growth and Value. Within the A-rated Outsourcing – Education Services industry, UDMY is ranked #4 out of 20 stocks.

To access UDMY’s Stability, Sentiment, Quality, and Momentum ratings, click here.

Stock #2: Graham Holdings Company (GHC)

GHC is a diversified education and media company. The company offers test preparation services and materials, professional training, exam preparation for professional certifications and licensures, and more.

GHC’s trailing-12-month net income margin of 4.86% is 9.4% higher than the industry average of 4.34%. Additionally, the stock’s trailing-12-month cash from operations of $348.02 million is 30.6% higher than the sector average of $266.59 million.

For the fiscal 2024 third quarter that ended September 30, GHC’s operating revenues increased 8.6% year-over-year to $1.21 billion. Its operating income amounted to $81.65 million, compared to a loss of $57.11 in the previous year’s quarter.

Moreover, the company’s adjusted net income and adjusted net income per common share grew 55.9% and 65.1% from the year-ago values to $76.14 million and $17.25, respectively.

Street expects GHC’s revenue for the fiscal 2025 first quarter (ending in March) to increase 4.3% year-over-year to $1.20 billion. Its EPS for the same period is expected to marginally increase year-over-year to $11.29. Plus, the company has surpassed consensus EPS estimates in three of the four trailing quarters.

Shares of GHC surged 18.1% over the past six months and 27.5% over the year to close the last trading session at $903.10.

GHC’s robust fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.

GHC has a B grade for Growth, Value, Stability, and Sentiment. Within the Outsourcing – Education Services industry, GHC is ranked #3 out of 20 stocks.

In addition to the POWR Rating highlighted above, you can check GHC’s ratings for Momentum and Quality here.

Stock #1: Perdoceo Education Corporation (PRDO)

PRDO offers postsecondary education through online, campus-based, and blended learning programs. The company functions through two segments: Colorado Technical University and The American InterContinental University System.

On December 2, 2024, PRDO completed the acquisition of the University of St. Augustine for Health Sciences, LLC, a leading university offering graduate health sciences degrees, for $138 million. The acquisition could strengthen PRDO’s portfolio of offerings regarding medical science degrees and enhance consumer growth.

PRDO’s trailing-12-month EBITDA margin of 26.60% is 130.1% higher than the industry average of 11.56%. Its trailing-12-month levered FCF margin of 21.81% is 380.1% higher than the sector average of 4.54%. Furthermore, the stock’s trailing-12-month net income margin of 20.42% is 359.5% higher than the 4.44% industry average.

For the fiscal 2024 third quarter that ended September 30, PRDO’s total revenue came in at $169.83 million. Its adjusted operating income rose 2.8% from the year-ago value to $48.57 million. Additionally, the company’s net income and adjusted EPS amounted to $38.26 million and $0.59, respectively.

The consensus revenue and EPS estimates of $175 million and $0.64 for the fiscal 2025 first quarter (ending in March) exhibit a year-over-year rise of 4% and 6.7%, respectively. Additionally, the company has surpassed consensus revenue and EPS estimates in all of the four trailing quarters, which is noteworthy.

Shares of PRDO have surged 33.6% over the past three months and 58.9% over the past nine months to close the last trading session at $27.54.

PRDO’s POWR Ratings reflect its stable prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

PRDO has an A grade for Quality. It has topped the 20-stock Outsourcing – Education Services industry.

Click here to access PRDO’s rating for Momentum, Growth, Stability, Sentiment, and Value.

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GHC shares were trading at $903.10 per share on Wednesday morning, down $6.50 (-0.71%). Year-to-date, GHC has gained 3.58%, versus a 3.63% rise in the benchmark S&P 500 index during the same period.

About the Author: Aritra_Gangopadhyay

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success. More...

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