On Tuesday, Rosenblatt Securities adjusted its outlook on shares of Lincoln Educational Services (NASDAQ:LINC), increasing the price target to $20.00 from the previous $17.00. The firm maintained a Buy rating on the stock. The adjustment reflects the company's strong performance, marked by a 21% year-over-year growth in new student enrollments, also known as Starts.
The analyst from Rosenblatt attributes the growth to favorable conditions in the labor market, where there is an ongoing shortage of skilled workers. This gap in the workforce is partly due to baby boomers retiring, which has created a demand for new, skilled employees.
According to the analyst, Lincoln Educational Services is capitalizing on this trend through a combination of a robust pipeline of potential new students, expansion of existing programs, and the development of new campuses.
The firm's optimism is based on the expectation that these strategies will lead to sustained revenue growth and margin expansion for Lincoln Educational Services. The raised price target is founded on a valuation of approximately 10 times the company's enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization), which is consistent with the valuation of peer companies in the sector.
Rosenblatt's revised price target suggests confidence in Lincoln Educational Services' business model and its ability to thrive in the current economic environment. The endorsement of a Buy rating alongside a higher price target indicates a favorable outlook for the company's financial performance going forward.
In other recent news, Lincoln Tech has reported strong growth for its third quarter, with a 67% increase in adjusted EBITDA and a 21% rise in student starts. The company has also raised its financial guidance for 2024, projecting revenue between $430 million and $435 million. Lincoln Tech is expanding its hybrid teaching model and developing new campuses in Nashville, Philadelphia, Houston, and Long Island, all part of recent developments.
The company's corporate partnerships with Hyundai (OTC:HYMTF), Tesla (NASDAQ:TSLA), and Container Maintenance Corporation are expected to enhance training programs and revenue. Moreover, Lincoln Tech plans to divest the underperforming Euphoria Institute in Las Vegas to focus more on skilled trades and healthcare.
The company is optimistic about navigating regulatory challenges under the new administration. These developments are part of Lincoln Tech's strategic focus on expansion and adaptation to market demands in the skilled trades education sector.
InvestingPro Insights
Lincoln Educational Services' recent performance aligns with Rosenblatt Securities' optimistic outlook. According to InvestingPro data, the company has demonstrated strong financial growth, with revenue increasing by 15.22% over the last twelve months to $423.21 million. This growth is reflected in the stock's impressive performance, with a 72.46% price return over the past year.
InvestingPro Tips highlight that Lincoln holds more cash than debt on its balance sheet, indicating a solid financial position. This strength could support the company's expansion plans mentioned in the analyst report. Additionally, the company's high shareholder yield suggests it's effectively returning value to investors, which may contribute to its attractiveness in the market.
It's worth noting that while the stock has shown significant returns, it's currently trading at a high P/E ratio of 50.64, which investors should consider in their valuation assessments. For those interested in a deeper analysis, InvestingPro offers 17 additional tips for Lincoln Educational Services, providing a comprehensive view of the company's financial health and market position.
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