While Perdoceo Education Corporation (NASDAQ:PRDO) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$17.39 and falling to the lows of US$11.98. 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 Perdoceo Education's current trading price of US$12.02 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 Perdoceo Education’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Perdoceo Education still cheap?
Good news, investors! Perdoceo Education is still a bargain right now according to my price multiple model, which compares 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 8.13x is currently well-below the industry average of 31.55x, meaning that it is trading at a cheaper price relative to its peers. However, given that Perdoceo Education’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Perdoceo Education look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of Perdoceo Education, it is expected to deliver a relatively unexciting earnings growth of 9.0%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Perdoceo Education, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since PRDO is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on PRDO for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PRDO. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Perdoceo Education has 2 warning signs we think you should be aware of.
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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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