APEI: An Online Education Stock Ready To Breakout

Research
Written By Alex Barrow

It's that time again! Once a month I pull breakout alerts from our premium Breakout Alerts service. Members of the service receive 6-8 potential breakout opportunities each week.This week we've got a play on the COVID back-to-school crisis. Schools have no idea what they're doing for the upcoming year. This should bode well for online education alternatives.Enter American Public Education (APEI).The company provides online and campus-based postsecondary education. Revenues have slowed the last few years but we saw an uptick in the last quarter. APEI trades around 15x its free cash flow.If online education ramps up dramatically, those cash flows will expand (and likely its multiple).Anyways, here's the alert. Our premium members receive 6-8 breakout alerts every week. So far we're up 33.20% on the year from our Breakout Alerts.

Breakout Formation: Inverse Head & Shoulders w/ Double Bottom

Trade Parameters: 

  • 3% Entry: $34.74
  • 1.50% Entry: $34.24
  • Stop-Loss: $30.54
  • Profit Target: $47.00
  • Reward/Risk: 3.45x

Business Description

American Public Education, Inc., together with its subsidiaries, provides online and campus-based postsecondary education. The company operates in two segments, American Public Education and Hondros College of Nursing. It offers 121 degree programs and 111 certificate programs in various fields of study, including business administration, health science, technology, criminal justice, education, and liberal arts, as well as national security, military studies, intelligence, and homeland security. The company also provides diploma in practical nursing, an associate degree in nursing, and an associate degree in medical laboratory technology. - TIKR.com

Financials: 

  • Market Cap: $480M
  • Enterprise Value: $296M
  • Gross Margins: 62%
  • Operating Margins: 8%
  • EV/EBIT: 16x
  • EV/FCF: 9x

What We Like:

  • Play on COVID online education
  • Receivables turnover (growing) QoQ & DSO shrinking
  • $184M in cash on balance sheet
  • Trading <1x EV/Revenues
  • FCF positive

What We Don’t Like:

  • Negative Revenue growth
  • <4% operating margins
Alex Barrow

Founder & MO Team Lead, CIO at Foundation Capital, macro junky, former Intelligence professional at FBI, DIA, and DOD, USMC Scout Sniper turned yogi/meditator.

https://x.com/MacroOps
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