Rating Change #3
Education Management Corporation (EDMC) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and feeble growth in the company's earnings per share.
Highlights from the ratings report include:
- Compared to its closing price of one year ago, EDMC's share price has jumped by 65.71%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 45.20% is the gross profit margin for EDUCATION MANAGEMENT CORP which we consider to be strong. Regardless of EDMC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.00% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 26.0% when compared to the same quarter one year ago, falling from $36.45 million to $26.95 million.
- Net operating cash flow has declined marginally to $221.31 million or 4.19% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, EDUCATION MANAGEMENT CORP has marginally lower results.
Education Management Corporation provides post-secondary education in North America. The company has a P/E ratio of 15.4, above the average diversified services industry P/E ratio of 14.2 and below the S&P 500 P/E ratio of 17.7. Education Management has a market cap of $2.93 billion and is part of the services sector and diversified services industry. Shares are up 40.7% year to date as of the close of trading on Friday.You can view the full Education Management Ratings Report or get investment ideas from our investment research center.