Is American Public Education, Inc. (NASDAQ:APEI) Potentially Undervalued?

By
Simply Wall St
Published
November 06, 2020
NasdaqGS:APEI

American Public Education, Inc. (NASDAQ:APEI), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$36.34 and falling to the lows of US$27.22. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether American Public Education's current trading price of US$29.90 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at American Public Education’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for American Public Education

Is American Public Education still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 34.65x is currently trading in-line with its industry peers’ ratio, which means if you buy American Public Education today, you’d be paying a relatively reasonable price for it. Furthermore, it seems like American Public Education’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from American Public Education?

earnings-and-revenue-growth
NasdaqGS:APEI Earnings and Revenue Growth November 6th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. American Public Education's earnings over the next few years are expected to increase by 49%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? APEI’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at APEI? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on APEI, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for APEI, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for American Public Education you should know about.

If you are no longer interested in American Public Education, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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