Digital Learning Will Unlock Upskilling Demand In Latin America

Key Takeaways

• Digital expansion and focus on working adult education position Laureate to outperform on both enrollment and pricing as economies improve.
  
• Campus consolidation, online program growth, and robust B2B partnerships enhance margins, drive recurring revenue, and accelerate capital returns to shareholders.
  
• Reliance on traditional degree programs and core Latin American markets exposes Laureate to demographic, regulatory, competitive, and macroeconomic risks that threaten future growth and profitability.

Catalysts

Offers higher education programs and services to students through a network of universities and higher education institutions.

• Analyst consensus sees steady enrollment growth from digital expansion and new campuses, but current guidance may significantly understate the opportunity-recent intakes showed robust 6-8% enrollment growth even in challenging economies, suggesting outsized upside for both revenue and pricing as macro conditions recover.
  
• Analysts broadly agree on margin expansion from digital and operational efficiencies, but management's rapid campus consolidation and a strong mix shift to higher-margin online programs could catalyze a step-change in net margins and EBITDA, well above current expectations.
  
• Laureate's leading position in digital education for working adults-now comprising over 20% of students and growing 3 to 4 times faster than face-to-face programs-could enable it to capture a disproportionate share of surging demand for upskilling in Latin America, driving long-term top-line growth at premium unit economics.
  
• Exceptional job placement rates, a focus on skills-based (STEM, business, health sciences) and affordability have positioned Laureate as the trusted partner for government and corporate upskilling initiatives-creating powerful new recruitment pipelines and recurring B2B revenue streams that are largely absent from consensus models.
  
• The company's strong, cash-generative model and commitment to returning all excess cash to shareholders through ongoing buybacks and potential future payout increases signal a self-reinforcing cycle of EPS growth, with capital returns accelerating as cash flows compound.

Laureate Education Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Laureate Education compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Laureate Education's revenue will grow by 8.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 18.8% today to 17.1% in 3 years time.
• The bullish analysts expect earnings to reach $331.1 million (and earnings per share of $2.16) by about July 2028, up from $286.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.7x on those 2028 earnings, up from 12.2x today. This future PE is lower than the current PE for the US Consumer Services industry at 19.6x.
• Analysts expect the number of shares outstanding to decline by 2.45% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.82%, as per the Simply Wall St company report.

Laureate Education Future Earnings Per Share Growth

Risks

• Declining youth populations in Latin America and potential demographic headwinds may limit long-term enrollment growth, which would constrain revenue expansion across Laureate's key markets.
  
• The company's significant reliance on traditional degree programs faces mounting risk from the rapid proliferation of low-cost, high-quality online alternatives and micro-credentials, which could erode pricing power and compress net margins as students shift preferences.
  
• Increased regulatory scrutiny or government intervention in Latin America, such as stricter accreditation requirements or tuition controls, could elevate compliance costs and reduce the ability to grow earnings over time.
  
• Laureate's business model depends heavily on Brazil and Mexico, resulting in elevated exposure to currency fluctuations and macroeconomic volatility in these regions, which introduces ongoing uncertainty into revenue and earnings visibility.
  
• Persistent competitive pressure from global educational providers and EdTech startups threatens to squeeze market share, diminish pricing flexibility and ultimately impede growth in both revenue and net margins.

Valuation

• The assumed bullish price target for Laureate Education is $27.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Laureate Education's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $19.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.9 billion, earnings will come to $331.1 million, and it would be trading on a PE ratio of 13.7x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $23.57, the bullish analyst price target of $27.0 is 12.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.