Universal Technical Institute (UTI) is a provider of postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians, notes David Coleman, an analyst with Argus Research.
UTI offers certificate, diploma and undergraduate degree programs at 14 U.S. campuses under several well-known brands, including Motorcycle Mechanics Institute, Marine Mechanics Institute, NASCAR Technical Institute, and MIAT College of Technology. UTI has provided technical education for 55 years.
Due to the pandemic, UTI suspended in-person classes in mid-March 2020. The company subsequently reopened by adopting a blended learning approach, which combines in-person labs with virtual instruction.
UTI has also been diversifying its program offerings and geographic locations through acquisitions, such as the MIAT College of Technology in Michigan. UTI expects the new programs to help drive enrollment and plans to expand them to at least nine existing campuses.
In 1Q21, the company purchased a campus in Avondale, Arizona, where it plans to relocate its motorcycle mechanics program, and consolidated facilities in Orlando, Florida.
Reflecting management’s guidance, we are raising our FY22 EPS forecast to $0.90 from $0.87. We are also raising our FY23 estimate to $0.90 from $0.61. Our revenue forecasts are $420 million for FY22 and $510 million for FY23. Our estimates assume contributions from new program offerings and recently acquired campuses as well as new student growth of 8%-12%.
We think that UTI shares are attractively valued at recent prices near $8, below the midpoint of their 52-week range of $5.34-$11.45. On a technical basis, the shares had been in a bullish pattern of higher highs and higher lows prior to March 2020, but dropped sharply at the onset of the pandemic when students were unable to attend school. Since late October 2020, the shares have risen 70%.
On the fundamentals, UTI shares are trading at 9-times our FY22 EPS estimate. We believe that a higher valuation is warranted based on the company’s expansion efforts and prospects for increased enrollment as more workers seek to improve their skills in an uncertain economy.
We believe that a higher valuation is warranted based on the company’s expansion efforts and prospects for increased enrollment as more workers seek to improve their skills in an uncertain economy. As such, we are raising our rating to "buy" with a target price of $10.
