Strategic Education: A Smart Play?

05/06/2019 5:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Strategic Education (STRA), based in Herndon, Va., provides a variety of educational services; the firm was formerly known as Strayer Education, notes Leo Fasciocco, technical expert and editor of Ticker Tape Digest.

With annual revenues of $634 million, Strategic Education provides post-secondary education and other academic programs. It operates through Strayer University, New York Code and Design Academy and Capella Education Co.

It provides programs in business, accounting, information technology, education, nursing, public administration and criminal justice at 74 campuses in the Mid-Atlantic and Southern U.S. and online.

Strayer  University also offers an executive Master of Business Administration (MBA) online through its Jack Welch Management Institute.

The stocks recent breakout was triggered when the company reported net for the first quarter of $1.66 a share topping the consensus estimate of $1.43 a share. It also topped the highest estimate at $1.48 a share. When a company can do that, the stock often does well.

The stock fell from around $160 back in 2011 to $33 by 2013. However, since then the stock put down a bottom and has since been working higher. Since 2016, it has climbed from $50 a share to $158.

Technically, the stock put down a tight flat base and gapped out of the base with heavy volume. That is a very powerful breakout. Its momentum indicator is strongly bullish.

Quarterly earnings will be strong and show an acceleration in growth. That is bullish. This year, analysts have been  forecasting a 27% jump in net to $6.04 a share from the $4.75 the year before. That Street estimate could be boosted after the strong first quarter.

Profits for the second quarter should surge 56% an acceleration in growth from the first quarter's 35% gain. The Street is predicting $1.36 a share up from  87 cents the year before.The stock sells with a price-earnings ratio of 26. We see that as reasonable.

Going out to 2020, the Street is predicting a 17% jump in net to $7.09 a share from the anticipated $6.04 this year. We are targeting the stock for a move to $190 within the next few months, or sooner. A protective stop can be placed $146.

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