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On Friday, William Blair upgraded American Public Education (NASDAQ:APEI) stock from Market Perform to Outperform. Analyst Stephen Sheldon cited several reasons for the positive outlook, including the stock’s current valuation, which is below the average of its peers in the for-profit education sector. According to InvestingPro data, APEI currently trades at an EV/EBITDA multiple of 7.36x and shows a PEG ratio of 0.31, suggesting attractive valuation relative to growth. Sheldon highlighted that APEI’s shares are trading at 5.2 times the firm’s 2025 adjusted EBITDA estimate, in contrast to the peer group average of around 10 times.
Sheldon was particularly encouraged by the company’s performance this quarter, noting three key areas of progress. First, American Public Education demonstrated robust enrollment and revenue growth, with InvestingPro showing revenue of $613.25 million in the last twelve months and a healthy gross profit margin of 51.93%. Second, the company showed significant improvement in profitability at its nursing colleges, Rasmussen and Hondros. Lastly, Sheldon pointed out the potential revenue and cost synergies expected from the combination of educational units in 2025, which is also anticipated to mitigate regulatory risk. InvestingPro analysis indicates the company maintains a GOOD financial health score, with liquid assets exceeding short-term obligations.
Despite American Public Education’s profit margins being below the industry average—low-teens compared to peers in the low-20% range—Sheldon believes that with the company’s revenue growth now aligning with that of the peer group and the growing visibility into near-term margin expansion, APEI is poised to narrow the valuation gap with its competitors.
In conclusion, the analyst expressed confidence that American Public Education is well-positioned to deliver accelerating revenue growth along with expanding margins. Sheldon anticipates that the company’s shares should appreciate at least in line with earnings growth and may also benefit from a higher valuation multiple re-rating.
In other recent news, American Public Education Inc. (APEI) reported its fourth-quarter 2024 earnings, showcasing a mixed financial outcome. The company’s earnings per share (EPS) came in at $0.63, which did not meet the forecasted $0.69, although revenue surpassed expectations, reaching $164.1 million compared to the anticipated $161.78 million. This revenue figure represents a robust 7.4% year-over-year increase. APEI also announced plans to consolidate its educational institutions by the fourth quarter of 2025, aiming to streamline operations. The company has set a revenue guidance of $650-$660 million for 2025, with an adjusted EBITDA target of $75-$85 million. Additionally, APEI’s enrollment growth was particularly strong in the nursing and military education sectors. Analysts noted the company’s positive revenue outlook for 2025, with firms like Truist Securities engaging in discussions about potential synergies from the planned consolidation. APEI’s CEO, Angela Seldin, expressed confidence in the company’s future direction, emphasizing 2025 as a "year of simplification."
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