Higher education company Perdoceo Education (NASDAQ:PRDO) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 19.3% year on year to $176.4 million. Its non-GAAP profit of $0.50 per share was 4.2% above analysts’ consensus estimates.
Is now the time to buy Perdoceo Education? Find out by accessing our full research report, it’s free.
Perdoceo Education (PRDO) Q4 CY2024 Highlights:
- Revenue: $176.4 million vs analyst estimates of $160.1 million (19.3% year-on-year growth, 10.2% beat)
- Adjusted EPS: $0.50 vs analyst estimates of $0.48 (4.2% beat)
- Adjusted EBITDA: $42.68 million vs analyst estimates of $40.53 million (24.2% margin, 5.3% beat)
- Adjusted EPS guidance for the upcoming financial year 2025 is $2.41 at the midpoint, beating analyst estimates by 2.1%
- Operating Margin: 21.1%, up from 14.5% in the same quarter last year
- Free Cash Flow Margin: 10%, up from 7.8% in the same quarter last year
- Market Capitalization: $1.85 billion
Company Overview
Formerly known as Career Education Corporation, Perdoceo Education (NASDAQ:PRDO) is an educational services company that specializes in postsecondary education.
Education Services
A whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Perdoceo Education’s 1.7% annualized revenue growth over the last five years was weak. This fell short of our benchmarks and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Perdoceo Education’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1% annually. 
This quarter, Perdoceo Education reported year-on-year revenue growth of 19.3%, and its $176.4 million of revenue exceeded Wall Street’s estimates by 10.2%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and implies its newer products and services will not accelerate its top-line performance yet.
Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend.
Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Perdoceo Education has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 19% over the last two years, quite impressive for a consumer discretionary business.
Perdoceo Education’s free cash flow clocked in at $17.6 million in Q4, equivalent to a 10% margin. This result was good as its margin was 2.1 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.
Key Takeaways from Perdoceo Education’s Q4 Results
We were impressed by how significantly Perdoceo Education blew past analysts’ revenue expectations this quarter. We were also glad its EPS guidance for next quarter was higher than Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $29 immediately following the results.
Indeed, Perdoceo Education had a rock-solid quarterly earnings result, but is this stock a good investment here? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
