Jul 24, 2006
- Several catalysts
for short-term price appreciation exist: A favorable earnings announcement,
accelerating revenue and earnings growth...
Laureate
Educatin, Inc (LAUR) provides educational services through campuses and
online.
Key
Information:
Fundamental:
Sector:
Services
Industry:
Educational and Training Services
Liquidity:
Market
Capitalization: $2.51 billion
Average daily
volume (3-month): 411 thousand shares
Closing Stock
Price: $48.83
Risk
Proxies:
52-week high /
52-week low: 1.36
Beta
(3-month): 0.41
Debt/Equity: 0
Profitable:
Yes
Valuation:
Price/Sales:
2.69
Price/Book:
2.50
Price/Earnings:
34.78
Price/2006
Analyst Earnings Estimates: 20.09
Fundamental Analysis
Overview
Several
catalysts for short-term price appreciation exist: A favorable earnings
announcement, accelerating revenue and earnings growth, and a high short ratio.
Long-Term
Growth
Revenues and
earnings growth has been relatively strong during the past five years; revenues
have grown at an average annual rate of 15.5%, and earnings have moved from
negative territory to plus $85 million.
The strong
long-term growth is a positive.
Recent
Growth
Revenues for
Q2 2006 came in 28.9% above revenues for Q1 2006, and 39.1% above revenues for
Q2 2005. EPS for Q2 2006 was $0.72, up from -$0.01 in Q1 2006, and $0.38
in Q2 2005.
We view the
strong recent revenue and earnings growth as being positives for the
stock. It is also a positive that the recent growth rate has been higher
than the long-term growth rate.
Shares Sold
Short
Roughly 2.63
million shares were sold short as of the 12th of June; this is
roughly 8 days of average volume. Many of shorts likely covered on
Friday's bullish earnings results, and sharp stock-price advance.
However, the remaining short positions should add fuel to any positive momentum
that materializes.
Analyst
Forecasts
Analysts
forecast 2006 EPS of $2.00, and 2007 EPS of $2.43. The spread of these
estimates are $0.03 and $0.12, respectively. Analyst forecasts are for
20% annual EPS growth over the next five years.
Laureate's
managers are much more bullish than analysts; Laureate reiterated guidance for
2006 EPS of 2.05 to 2.15, and 2007 EPS of 2.59 to 2.67. Laureate's
chairman and CEO forecasts 25% annual EPS growth over the next five years.
During the
MRQ, EPS came in at $0.77, well above the consensus estimate of $0.68.
Three analysts
rate the stock as a Strong Buy, five rate it as a Buy, and four rate it as a
Hold.
We view the
tight analyst estimate spread, strong long-term growth estimates, positive
ratings, and relatively bullish management forecasts as positive indicators for
the stock.
Technical
Analysis
As described
in yesterday's EAKL, we are technically bullish on LAUR:
- The stock rose strongly and on high volume following
an earnings announcement (see Signal and Prtamani, 2001)
- The stock broke out of a descending channel
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Reference
Pritamani, Mahesh, and Vijay Singal, "Return predictability
following large price changes and information releases" Journal of Banking
and Finance, April 2001, 25(4), pp.631-656.
Key
Levels
Buy:
Market
We are
technically and fundamentally bullish on the stock
Target:
54.47
Slightly below
resistance
Please note:
Today's stock analysis is not intended to replace a comprehensive review of
company financial statements, or an analyst recommendation.
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