G8 Education (ASX:GEM) - Share price, News & Analysis

Q: What is the Fair Price of GEM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

GEM (A$1.08) is trading below our estimate of [[fair value]] (A$1.23)

GEM fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	2/6
Past Performance	2/6
Financial Health	3/6
Dividends	3/6

GEM Stock Overview

G8 Education Limited provides early childhood education and care services in Australia.

Rewards

Trading at 11.9% below our estimate of its fair value

Earnings are forecast to grow 18.16% per year

Became profitable this year

Risk Analysis

Unstable dividend track record

G8 Education Competitors

IDP Education

ASX:IEL

AU$6.9b

Kip McGrath Education Centres

ASX:KME

AU$54.3m

Retech Technology

ASX:RTE

AU$44.3m

8VI Holdings

ASX:8VI

AU$49.8m

Price History & Performance

Summary of all time highs, changes and price drops for G8 Education
Historical stock prices
Current Share Price	AU$1.08
52 Week High	AU$1.33
52 Week Low	AU$0.92
Beta	1.06
1 Month Change	-6.49%
3 Month Change	-5.26%
1 Year Change	8.54%
3 Year Change	-64.12%
5 Year Change	-71.12%
Change since IPO	140.00%

Recent News & Updates

May 18

A Look At The Fair Value Of G8 Education Limited (ASX:GEM)

How far off is G8 Education Limited ( ASX:GEM ) from its intrinsic value? Using the most recent financial data, we'll...

Apr 13

Should You Think About Buying G8 Education Limited (ASX:GEM) Now?

While G8 Education Limited ( ASX:GEM ) might not be the most widely known stock at the moment, it saw significant share...

Shareholder Returns

	GEM	AU Consumer Services	AU Market
7D	1.9%	7.7%	1.4%
1Y	8.5%	-10.6%	-11.3%

Return vs Industry: GEM exceeded the Australian Consumer Services industry which returned -10.6% over the past year.

Return vs Market: GEM exceeded the Australian Market which returned -11.3% over the past year.

Price Volatility

Is GEM's price volatile compared to industry and market?
GEM volatility
GEM Average Weekly Movement	4.6%
Consumer Services Industry Average Movement	7.1%
Market Average Movement	9.7%
10% most volatile stocks in AU Market	16.3%
10% least volatile stocks in AU Market	4.2%

Stable Share Price: GEM is less volatile than 75% of Australian stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: GEM's weekly volatility (5%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
2007	7,598	Gary Carroll	https://www.g8education.edu.au

G8 Education Limited provides early childhood education and care services in Australia. It offers its services under the Buggles, Community Kids, Casa Bambini, Creative Garden, First Grammar, Great Beginnings, Green Wood, Head Start, Kool Kids, Kindy Patch Kids, Jelly Beans, Pelicans, Kinder Haven, Nurture One, World Of Learning, The Learning Sanctuary, Sand Castles, Bambinos, Pelican child care, Penguin child care, and Early learning services brands. The company also provides disability support services, including specialist early intervention and allied health support services under the Leor brand name.

G8 Education Fundamentals Summary

How do G8 Education's earnings and revenue compare to its market cap?
GEM fundamental statistics
Market Cap	AU$903.08m
Earnings (TTM)	AU$45.68m
Revenue (TTM)	AU$866.34m

19.8x

P/E Ratio

1.0x

P/S Ratio

Is GEM overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
GEM income statement (TTM)
Revenue	AU$866.34m
Cost of Revenue	AU$38.78m
Gross Profit	AU$827.55m
Other Expenses	AU$781.87m
Earnings	AU$45.68m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

Aug 24, 2022

Earnings per share (EPS)	0.055
Gross Margin	95.52%
Net Profit Margin	5.27%
Debt/Equity Ratio	10.5%

How did GEM perform over the long term?

See historical performance and comparison

Dividends

2.8%

Current Dividend Yield

56%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is GEM undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for GEM?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for GEM. This is calculated by dividing GEM's market cap by their current preferred multiple.
What is GEM's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	AU$903.08m

GEM key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.8x
Enterprise Value/EBITDA	12.2x
PEG Ratio	1.1x

Price to Earnings Ratio vs Peers

How does GEM's PE Ratio compare to its peers?

GEM PE Ratio vs Peers

The above table shows the PE ratio for GEM vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	52.2x
IEL IDP Education	114.2x	29.4%	AU$6.9b
KME Kip McGrath Education Centres	29.7x	n/a	AU$54.3m
RTE Retech Technology	40.6x	n/a	AU$44.3m
8VI 8VI Holdings	24.2x	n/a	AU$49.8m
GEM G8 Education	19.8x	18.2%	AU$903.1m

Forward PE

Price-To-Earnings vs Peers: GEM is good value based on its Price-To-Earnings Ratio (19.8x) compared to the peer average (52.2x).

Price to Earnings Ratio vs Industry

How does GEM's PE Ratio compare vs other companies in the Global Consumer Services Industry?

Price-To-Earnings vs Industry: GEM is expensive based on its Price-To-Earnings Ratio (19.8x) compared to the Global Consumer Services industry average (18.1x)

Price to Earnings Ratio vs Fair Ratio

What is GEM's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

GEM PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	19.8x
Fair PE Ratio	30.3x

Price-To-Earnings vs Fair Ratio: GEM is good value based on its Price-To-Earnings Ratio (19.8x) compared to the estimated Fair Price-To-Earnings Ratio (30.3x).

Share Price vs Fair Value

What is the Fair Price of GEM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: GEM (A$1.08) is trading below our estimate of fair value (A$1.23)

Significantly Below Fair Value: GEM is trading below fair value, but not by a significant amount.

Price to Earnings Growth Ratio

PEG Ratio: GEM is poor value based on its PEG Ratio (1.1x)

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Future Growth

How is G8 Education forecast to perform in the next 1 to 3 years based on estimates from 7 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

18.2%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: GEM's forecast earnings growth (18.2% per year) is above the savings rate (1.8%).

Earnings vs Market: GEM's earnings (18.2% per year) are forecast to grow faster than the Australian market (6% per year).

High Growth Earnings: GEM's earnings are forecast to grow, but not significantly.

Revenue vs Market: GEM's revenue (4.7% per year) is forecast to grow slower than the Australian market (5.2% per year).

High Growth Revenue: GEM's revenue (4.7% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: GEM's Return on Equity is forecast to be low in 3 years time (8.4%).

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Past Performance

How has G8 Education performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-35.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: GEM has high quality earnings.

Growing Profit Margin: GEM became profitable in the past.

Past Earnings Growth Analysis

Earnings Trend: GEM's earnings have declined by 35.7% per year over the past 5 years.

Accelerating Growth: GEM has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: GEM has become profitable in the last year, making it difficult to compare its past year earnings growth to the Consumer Services industry (1.1%).

Return on Equity

High ROE: GEM's Return on Equity (5%) is considered low.

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Financial Health

How is G8 Education's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: GEM's short term assets (A$123.6M) do not cover its short term liabilities (A$253.9M).

Long Term Liabilities: GEM's short term assets (A$123.6M) do not cover its long term liabilities (A$677.4M).

Debt to Equity History and Analysis

Debt Level: GEM's net debt to equity ratio (2.4%) is considered satisfactory.

Reducing Debt: GEM's debt to equity ratio has reduced from 65.3% to 10.5% over the past 5 years.

Debt Coverage: GEM's debt is well covered by operating cash flow (87.7%).

Interest Coverage: GEM's interest payments on its debt are not well covered by EBIT (2x coverage).

Balance Sheet

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Dividend

What is G8 Education current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

2.78%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: GEM's dividend (2.78%) is higher than the bottom 25% of dividend payers in the Australian market (2.75%).

High Dividend: GEM's dividend (2.78%) is low compared to the top 25% of dividend payers in the Australian market (6.85%).

Stability and Growth of Payments

Stable Dividend: GEM's dividend payments have been volatile in the past 10 years.

Growing Dividend: GEM's dividend payments have fallen over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (55.7%), GEM's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonable cash payout ratio (60.3%), GEM's dividend payments are covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

2.9yrs

Average management tenure

CEO

Gary Carroll

5.42yrs

Tenure

AU$1,474,022

Compensation

Mr. Gary G. Carroll, B.Comm (Hons), B.Law (Hons), CPA, has been Chief Executive Officer, Managing Director and Executive Director of G8 Education Limited since January 1, 2017. Mr. Carroll is responsible f...

CEO Compensation Analysis

Compensation vs Market: Gary's total compensation ($USD1.02M) is about average for companies of similar size in the Australian market ($USD1.04M).

Compensation vs Earnings: Gary's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: GEM's management team is considered experienced (2.9 years average tenure).

Board Members

Experienced Board: GEM's board of directors are considered experienced (4.8 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/27 00:00
End of Day Share Price	2022/06/27 00:00
Earnings	2021/12/31
Annual Earnings	2021/12/31