Adtalem (ATGE)

Vocational education company Adtalem Global Education (NYSE:ATGE) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 10.8% year on year to $462.3 million. The company expects the full year’s revenue to be around $1.92 billion, close to analysts’ estimates. Its non-GAAP profit of $1.75 per share was 10.9% above analysts’ consensus estimates.

Company Overview

Formerly known as DeVry Education Group, Adtalem Global Education (NYSE:ATGE) is a global provider of workforce solutions and educational 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.

Adtalem's primary competitors include Laureate Education (NASDAQ:LAUR), Grand Canyon Education (NASDAQ:LOPE), Strayer Education (NASDAQ:STRA), and Kaplan (owned by Graham Holdings Company NYSE:GHC), and private company Apollo Education Group.

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Adtalem grew its sales at a 12.5% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

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. Adtalem’s annualized revenue growth of 11.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Adtalem reported year-on-year revenue growth of 10.8%, and its $462.3 million of revenue exceeded Wall Street’s estimates by 2%.

Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

Adtalem’s operating margin has risen over the last 12 months and averaged 18.8% over the last two years. On top of that, its profitability was top-notch for a consumer discretionary business, showing it’s an well-run company with an efficient cost structure.

In Q3, Adtalem generated an operating margin profit margin of 18.5%, up 1.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Adtalem’s EPS grew at a spectacular 21.1% compounded annual growth rate over the last five years, higher than its 12.5% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q3, Adtalem reported adjusted EPS of $1.75, up from $1.29 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Adtalem’s full-year EPS of $7.14 to grow 11.2%.

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.

Adtalem 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 16.3% over the last two years, quite impressive for a consumer discretionary business.

Adtalem’s free cash flow clocked in at $114.5 million in Q3, equivalent to a 24.8% margin. This result was good as its margin was 5.9 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.

Over the next year, analysts’ consensus estimates show they’re expecting Adtalem’s free cash flow margin of 17.6% for the last 12 months to remain the same.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Adtalem historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10.5%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Adtalem’s ROIC has increased. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Adtalem reported $264.7 million of cash and $776 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $475 million of EBITDA over the last 12 months, we view Adtalem’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $42.74 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Adtalem beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a decent quarter. The stock remained flat at $142.13 immediately after reporting.

Updated: December 3, 2025 at 10:04 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Adtalem.

We see the value of companies helping consumers, but in the case of Adtalem, we’re out. To begin with, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Adtalem’s Forecasted free cash flow margin suggests the company will ramp up its investments next year, and its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Adtalem’s EV-to-EBITDA ratio based on the next 12 months is 9x. At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $166.50 on the company (compared to the current share price of $94.31).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.