Educational Development Stock – GuruFocus.com
According to the calculation of the GuruFocus value, the education development stock (NAS: EDUC, 30 years financial) gives all indications of being slightly undervalued. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, past business growth, and analysts’ estimates of future business performance. If a share‘s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 12.53 per share and market cap of $ 108.4 million, the Educational Development stock appears to be slightly undervalued. The value of GF for educational development is illustrated in the table below.
As the development of education is relatively undervalued, the long-term return on its actions is likely to be greater than the growth in its activity, which has averaged 21.1% over the past five years.
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Since investing in companies with poor financial strength could result in a permanent loss of capital, investors should carefully consider the financial strength of a company before deciding whether or not to buy shares. Examining the cash-to-debt ratio and interest coverage can provide a good initial perspective on the financial strength of the business. Education Development has a cash-to-debt ratio of 0.11, which is worse than 87% of media companies – diversified. On this basis, GuruFocus ranks Educational Development’s financial strength at 6 out of 10, which suggests a fair track record. Here is the debt and liquidity of Educational Development in recent years:
Companies that have historically been profitable over the long term pose less risk to investors who want to buy stocks. Higher profit margins usually dictate a better investment compared to a business with lower profit margins. Educational development has paid off 10 in the past 10 years. In the past twelve months, the company achieved sales of $ 204.6 million and earnings of $ 1.5 per share. Its operating margin is 7.80%, which ranks it better than 67% of companies in the Media – Diversified industry. Overall, the profitability of Education Development is ranked 8 out of 10, indicating high profitability. Here is the turnover and net income of Education Development for the past few years:
One of the most important factors in the valuation of a business is growth. Long-term equity performance is closely linked to growth, according to GuruFocus research. Companies that grow faster create more shareholder value, especially if that growth is profitable. The average annual growth in educational development revenue is 21.1%, which ranks better than 89% of companies in the media sector – diversified. The 3-year average EBITDA growth is 22.7%, which ranks better than 76% of companies in the Media – Diversified industry.
Another way to determine a company’s profitability is to compare its return on invested capital to the weighted average cost of capital. Return on Invested Capital (ROIC) measures the extent to which a business generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company should pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies that the company creates value for the shareholders. Over the past 12 months, Educational Development’s return on invested capital is 26.57 and its cost of capital is 6.85. The historical ROIC vs WACC comparison of education development is shown below:
In short, the Educational Development action (NAS: EDUC, 30-year Financials) shows all the signs of modest undervaluation. The company’s financial position is fair and its profitability is solid. Its growth ranks better than 76% of companies in the Media industry – Diversified. To find out more about the Educational Development action, you can consult its financial data over 30 years here.
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