Perdoceo Education (NASDAQ:PRDO) Delivers Impressive Q1

Kayode Omotosho /
2024/05/01 4:29 pm EDT

Higher education company Perdoceo Education (NASDAQ:PRDO) beat analysts' expectations in Q1 CY2024, with revenue down 14% year on year to $168.3 million. It made a GAAP profit of $0.59 per share, improving from its profit of $0.50 per share in the same quarter last year.

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Perdoceo Education (PRDO) Q1 CY2024 Highlights:

  • Revenue: $168.3 million vs analyst estimates of $163.3 million (3% beat)
  • EPS: $0.59 vs analyst estimates of $0.52 (13.5% beat)
  • EPS (non-GAAP) Guidance for Q2 CY2024 is $0.58 at the midpoint, above analyst estimates of $0.53
  • EPS (non-GAAP) Guidance for full year 2024 is $2.19 at the midpoint, above analyst estimates of $2.12
  • Gross Margin (GAAP): 82.3%, down from 84.1% in the same quarter last year
  • Free Cash Flow of $53.29 million, up from $11.58 million in the previous quarter
  • Market Capitalization: $1.2 billion

"First quarter results were better than expected, as both academic institutions continue to experience positive trends within student retention and engagement,” said Todd Nelson, President and Chief Executive Officer.

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

A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Perdoceo Education's annualized revenue growth rate of 2% over the last five years was weak for a consumer discretionary business. Perdoceo Education Total RevenueWithin consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Perdoceo Education's recent history shines a dimmer light on the company as its revenue was flat over the last two years.

This quarter, Perdoceo Education's revenue fell 14% year on year to $168.3 million but beat Wall Street's estimates by 3%.

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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, Perdoceo 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 19.9%, quite impressive for a consumer discretionary business.

Perdoceo Education Free Cash Flow Margin

Perdoceo Education's free cash flow came in at $53.29 million in Q1, equivalent to a 31.7% margin and up 1,913% year on year.

Key Takeaways from Perdoceo Education's Q1 Results

We liked that Perdoceo Education's revenue and EPS outperformed Wall Street's estimates. Next quarter's EPS was ahead of expectations, as was full year EPS guidance. Overall, we think this was a really good quarter that should please shareholders. The stock is flat after reporting and currently trades at $18.2 per share.

So should you invest in Perdoceo 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.