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Strayer Education Raised to Strong Buy: Should You Add?

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On Jan 3, 2017, we upgraded Strayer Education Inc.STRA to a Zacks Rank #1 (Strong Buy) from #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here .

This post-secondary education provider, with a market cap of $894.5 million, has strengths in several key areas. Thus, adding the stock to your portfolio should be prudent.

Also, the U.S. presidential election had a positive impact on the school industry as shares of for-profit education companies like DeVry Education Group Inc. DV , Universal Technical Institute, Inc. UTI and American Public Education, Inc. APEI rallied post the victory of Donald Trump. Notably, shares of Strayer gained more than 74% over the past three months compared with 9.1% growth of the Zacks categorized Schools industry.

What Makes Strayer an Attractive Pick?

Estimate Revision : The consensus estimates has moved north by 5.8% for the next quarter and 6.1% for 2017. The positive earnings estimate revisions indicate analysts' confidence and substantiate the solid rank for the stock. Also, the stock has a long-term expected earnings growth of 5.3%.

Valuation : Strayer presently has a Price to Sales (P/S) ratio of about 2.01, lower than the S&P 500's average of 2.93. This implies undervalued trading - at least compared to historical norms.

Also, Strayer's Price to Cash Flow (P/CF) ratio of 16.5 is lower than the Zacks classified Schools industry average of 20.07, which indicates that the stock is undervalued at present. P/CF ratio generally determines whether a company's stock is overpriced or underpriced with reference to its cash flows generation potential compared to its competitors.

Moreover, Strayer has a forward P/E (Price to Earnings) of 20.94, below the current P/E ratio of 24.89. So it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term.

Superior ROE: Strayer's Return on Equity (ROE) ratio is 28.48%, compared with the industry average of 8.15%. This indicates that the company reinvests more efficiently as compared to the industry.

Flexible & Affordable Educational Programs: Strayer University's convenient, accessible and flexible programs are specifically designed to meet the educational needs of working adults. The company offers weekend and evening courses as well as online programs, which are well suited for the work-day schedules of adults.

With the improving market conditions, there is a growing demand for career oriented programs, which prepare students to be become part of a skilled workforce. Also, Strayer University is reducing the cost of its programs so as to increase affordability.

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AMER PUB EDUCAT (APEI): Free Stock Analysis Report

STRAYER EDUC (STRA): Free Stock Analysis Report

DEVRY EDUCATION (DV): Free Stock Analysis Report

UNIVL TECH INST (UTI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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