Grand Canyon Education's (NASDAQ:LOPE) Q4 Sales Beat Estimates,

Jabin Bastian /
2024/02/13 4:12 pm EST

Higher education company Grand Canyon Education (NASDAQ:LOPE) beat analysts' expectations in Q4 FY2023, with revenue up 7.6% year on year to $278.3 million. Guidance for next quarter's revenue was also better than expected at $272.3 million at the midpoint, 2% above analysts' estimates. It made a GAAP profit of $2.71 per share, improving from its profit of $2.36 per share in the same quarter last year.

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Grand Canyon Education (LOPE) Q4 FY2023 Highlights:

  • Revenue: $278.3 million vs analyst estimates of $275.2 million (1.1% beat)
  • EPS: $2.71 vs analyst estimates of $2.65 (2.3% beat)
  • Revenue Guidance for Q1 2024 is $272.3 million at the midpoint, above analyst estimates of $266.9 million
  • Management's revenue guidance for the upcoming financial year 2024 is $1.03 billion at the midpoint, in line with analyst expectations and implying 7% growth (vs 5.4% in FY2023)
  • Free Cash Flow of $106 million is up from -$46.44 million in the previous quarter
  • Gross Margin (GAAP): 56.2%, down from 57.1% in the same quarter last year
  • Enrolled Students: 117,279
  • Market Capitalization: $3.90 billion

Founded in 1949, Grand Canyon Education (NASDAQ:LOPE) is an educational services provider known for its operation at Grand Canyon University.

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 performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Grand Canyon Education's annualized revenue growth rate of 2.6% over the last five years was weak for a consumer discretionary business. Grand Canyon Education Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Grand Canyon Education's annualized revenue growth of 3.5% over the last two years is in line with its five-year revenue growth, suggesting the company's demand has been stable.

We can better understand the company's revenue dynamics by analyzing its number of students, which reached 117,279 in the latest quarter. Over the last two years, Grand Canyon Education's students were flat. Because this number is lower than its revenue growth during the same period, we can see the company's average selling price has risen. Grand Canyon Education Students

This quarter, Grand Canyon Education reported solid year-on-year revenue growth of 7.6%, and its $278.3 million of revenue outperformed Wall Street's estimates by 1.1%. The company is guiding for revenue to rise 8.8% year on year to $272.3 million next quarter, improving from the 2.5% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 6.4% over the next 12 months, a deceleration from this quarter.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.

Over the last two years, Grand Canyon Education has shown strong cash profitability, giving it an edge over its competitors and the option to reinvest or return capital to investors while keeping cash on hand for emergencies. The company's free cash flow margin has averaged 19.5%, quite impressive for a consumer discretionary business.

Grand Canyon Education Free Cash Flow Margin

Grand Canyon Education's free cash flow came in at $106 million in Q4, equivalent to a 38.1% margin and in line with the same quarter last year.

Key Takeaways from Grand Canyon Education's Q4 Results

It was good to see Grand Canyon Education's strong revenue guidance for the next quarter and full year 2024, which topped analysts' expectations. We were also glad this quarter's revenue and EPS came in higher than Wall Street's estimates, driven by a beat in its enrolled students and an increase in its average revenue per student. Zooming out, we think this was a decent, quarter, showing that the company is staying on track. The stock is up 1.6% after reporting and currently trades at $132.49 per share.

So should you invest in Grand Canyon Education right now? 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.