Premium Bilingual Education And AI Tools Will Drive Powerful Long Term Upside

Catalysts

About Vasta Platform

Vasta Platform provides an integrated K-12 education ecosystem in Brazil, combining learning systems, complementary solutions and school operations to deliver high-quality, data-driven education.

What are the underlying business or industry changes driving this perspective?

• Compounding growth in high value subscription learning systems, with four consecutive years of double digit expansion and 14.3% growth in the 2025 cycle, is deepening recurring revenue visibility and supporting sustained earnings upside.
• Rapid adoption of complementary educational solutions, growing above 20% and outpacing the core portfolio, is increasing wallet share per school and should structurally lift net revenue and gross profit over time despite short term mix effects.
• Scaling of premium bilingual education through the Start Angle franchise, with six operating units, more than 50 signed contracts, over 300 prospects and eight new units expected next year, is unlocking a higher ticket, higher margin segment that can accelerate revenue and expand EBITDA margins.
• Deployment of AI driven personalized learning tools such as individualized educational plans is poised to enhance student outcomes and school retention, reinforcing competitive differentiation and supporting stronger pricing power and margin resilience.
• Ongoing efficiency gains in collections, automation of financial processes and disciplined cash management, which have already doubled free cash flow and reduced leverage to 1.75 times EBITDA, are improving net margins, lowering financial expenses and increasing equity value capture from growing earnings.

Assumptions

This narrative explores a more optimistic perspective on Vasta Platform compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Vasta Platform's revenue will grow by 15.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 28.1% today to 3.9% in 3 years time.
• The bullish analysts expect earnings to reach R$102.2 million (and earnings per share of R$1.14) by about December 2028, down from R$488.3 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 37.8x on those 2028 earnings, up from 4.4x today. This future PE is greater than the current PE for the US Consumer Services industry at 16.6x.
• The bullish analysts expect the number of shares outstanding to grow by 0.25% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.28%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is leaning heavily on mid double digit subscription growth and more than 20% expansion in complementary products, so any slowdown in K to 12 enrollment, intensified competition in premium learning systems or pressure on pricing relative to inflation could weaken top line expansion and reduce revenue growth.
• Complementary solutions are growing faster but come with high payments to product owners and are already diluting gross margin from 64.2% to 62.8%. If this mix shift continues without offsetting pricing power or cost efficiencies, structural margin compression could erode profitability and lower net margins.
• Credit quality in the non premium segment remains challenging. While provisions for doubtful accounts improved to 3.1% of net revenue, a prolonged weak macroeconomic or credit environment in Brazil could reverse this trend, increase defaults and directly pressure earnings and free cash flow.
• Recent free cash flow strength was boosted by early collections in the 2025 sales cycle and management guides to a normalization toward a 50% EBITDA conversion rate. If working capital benefits fade faster than expected or receivable collection initiatives lose effectiveness, cash generation and deleveraging could slow, which would limit the upside to equity value and impact earnings quality.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Vasta Platform is $6.39, which represents up to two standard deviations above the consensus price target of $4.53. This valuation is based on what can be assumed as the expectations of Vasta Platform'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 $6.39, and the most bearish reporting a price target of just $3.21.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be R$2.7 billion, earnings will come to R$102.2 million, and it would be trading on a PE ratio of 37.8x, assuming you use a discount rate of 11.3%.
  
• Given the current share price of $4.9, the analyst price target of $6.39 is 23.3% higher. Despite analysts expecting the underlying business to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.