Assessing Grand Canyon Education’s Strong 58% Yearly Gain After Latest Industry Partnerships

If you have been watching Grand Canyon Education lately, you have probably noticed the stock has delivered both surprises and impressive staying power. After a slight dip of -0.9% over the last week, you might be wondering if this is just noise or the start of something more meaningful. Looking back a little further, the story gets much more compelling: a 5.7% gain over the past 30 days, 33.5% up year to date, and a dramatic 58.2% leap in the last year alone. Even more striking is that Grand Canyon Education has powered ahead by more than 160% over the past five years. Clearly, investors have been revisiting their risk assumptions and warming up to the company’s long-term prospects, helped in part by broad trends in the education services sector and renewed interest in providers offering scalable platforms.

But with a closing price of $215.99 and that kind of momentum, the big question becomes whether Grand Canyon Education is still undervalued or if it is riding a wave that could lose steam. That is where a valuation analysis comes in. By applying six widely recognized valuation checks, the company scores a 3, meaning Grand Canyon Education appears to be undervalued using half of the key metrics analysts watch most closely.

Next, I will break down these valuation approaches, show you how Grand Canyon Education stacks up, and reveal an even more insightful way to think about valuation by the end of the article.

Grand Canyon Education delivered 58.2% returns over the last year. See how this stacks up to the rest of the Consumer Services industry.

Approach 1: Grand Canyon Education Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and then discounting them to today's dollars. This approach helps investors gauge what the company should be worth based strictly on its potential to generate cash in the future.

For Grand Canyon Education, the current Free Cash Flow (FCF) stands at $254.96 million. Analysts forecast a steady increase over the next decade, with FCF projected to reach about $393.68 million by 2035. While direct analyst estimates are typically available for only the next several years, these longer-term figures are carefully extrapolated to provide a full picture of the company’s growth trajectory.

Using this method, the calculated intrinsic value of Grand Canyon Education's stock is $270.25 per share. With the current share price around $215.99, the model suggests the stock is trading at a 20.1% discount. This indicates potential upside for investors, particularly those who believe in the company’s ability to deliver on future cash flow growth.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Grand Canyon Education.

Our Discounted Cash Flow (DCF) analysis suggests Grand Canyon Education is undervalued by 20.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Grand Canyon Education Price vs Earnings (PE)

The price-to-earnings (PE) ratio is a widely used valuation metric, especially for profitable companies like Grand Canyon Education. This ratio helps investors understand how much they are paying for each dollar of current earnings, making it easier to compare companies across the same sector or industry. Because PE reflects both prevailing market sentiment and a company’s ability to generate profits, it is seen as a robust tool for evaluating mature, consistently profitable businesses.

However, what counts as a "fair" or "normal" PE ratio is shaped by more than raw earnings. It also depends on the company’s expected growth and the overall risks in its business. Higher expected earnings growth and lower risk tend to justify higher PE ratios, while slower growth or higher risk typically means a lower PE is appropriate.

Grand Canyon Education currently trades at a PE ratio of 25x, which is well above the Consumer Services industry average of around 18x and below its peer group average of 36x. To get a more tailored sense of value, Simply Wall St calculates a proprietary "Fair Ratio" of 21x for Grand Canyon Education. This calculation factors in its growth outlook, industry characteristics, profit margins, company size, and risks. Comparing against this benchmark gives a clearer signal than looking only at broad industry or peer averages, which may overlook nuances specific to the company's profile.

Since the actual PE ratio of 25x is above the Fair Ratio of 21x by a margin greater than 0.10, Grand Canyon Education appears slightly overvalued on this metric.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Grand Canyon Education Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a user-generated investment story that ties together your personal perspective on Grand Canyon Education’s business with your forecasts for its future revenue, profit margins, and fair value. Unlike traditional analysis, Narratives help you connect the actual story of the company and its outlook by linking what you believe will drive its future with a full financial forecast, turning raw data and projections into a real-world snapshot of potential value.

This approach is easy to use and available on Simply Wall St’s Community page, where investors worldwide create, share, and update their Narratives. Narratives enable you to decide when to buy or sell by comparing your estimated fair value directly with the current market price. As new events or earnings are announced, Narratives are automatically refreshed, keeping your insights timely and relevant.

For example, some investors are optimistic about Grand Canyon Education’s shift to online learning and broad employer partnerships, forecasting robust enrollment and margin growth and setting a fair value as high as $227.33. Others remain cautious about regulatory and enrollment risks, estimating a much lower fair value close to $205.29. Narratives let you see both perspectives at a glance and evaluate which story best fits your own view, making your investment decision smarter and more personalized.

Do you think there's more to the story for Grand Canyon Education? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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