American Public Education, Inc.

APEI Details

American Public Education, Inc. (NASDAQ: APEI) is a provider of post-secondary education via online and on-campus to approximately 93,800 students through its two subsidiary institutions, i.e., American Public University System, Inc. (APUS) and National Education Seminars, Inc. (also called Hondros College of Nursing – HCN). The company segments are organized in line with these institutions. APEI segment reflects the operational activities at APUS, corporate activities, and other minority investments, while the HCN segment represents the operational activities of HCN. The company generates major revenue from the APEI segment. The revenue is generated from net course registration and enrollment, tuition, and other fees. As of May 18, 2021, the company’s market capitalization stood at USD 523.16 million.

Launched 60 new courses: On March 4, 2021, American Public University System (APUS) added 60 new online courses across master’s and bachelor’s degree programs to help businesses to overcome economic challenges. It is done to prepare students, especially veterans, for their successful transition into future leadership roles. The company wants to continually innovate to address workforce requirements in both corporate and government sectors.

Offered Public Offering of common stock: On March 1, 2021, the company announced the closing of a previously announced public offering of its common stock. The company sold 3.68 million shares at a public offering price of USD 25 per share. Net proceeds from the offering were approximately USD 86.20 million after deducting underwriting discounts, commissions, and other offering expenses.

Q1FY21 Results: The company reported an increase of 18.66% in net revenue to USD 88.54 million in Q1FY21 (ending March 31, 2021) compared to USD 74.61 million in Q1FY20 (ending March 31, 2020), primarily driven by the increase in net course registrations in APEI segment. APEI segment contributed 87.44%, while the HCN segment contributed 12.57% of the net revenues in Q1FY21. Total enrollment at HCN in the quarter increased to approximately 2,300 students from approximately 1,600 students in Q1FY20. The company reported a sharp increase of 235% in net income to USD 8.10 million in Q1FY21 compared to USD 2.42 million in Q1FY20.

Q1FY21 highlights (Source: Company presentation, Q1FY21)

Key Risks: Service members of the U.S. armed forces are eligible to receive tuition assistance (TA). Students participating in TA constitute approximately 43% of APUS’s adjusted net course registration for 2020. The company’s revenue and the number of students will decrease if APUS does not receive funds under the Department of Defense (DoD) tuition assistance program.

Outlook: For Q2FY21, the company is expecting its new student enrollment to increase by approximately 37% compared to the same quarter of the prior year. The company is also expecting its EPS to be in the range of USD -0.04 to USD 0.03 for Q2FY21.

Q2FY21 Guidance (Source: Company Presentation, Q1FY21)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

APEI Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: APEI has declined by 20.97% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 24.97 to USD 41.09. The stock is currently trading below the 200 DMA levels. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 32.56. On the technical chart, the next support level is USD 25.48. Considering the correction in the stock price in the past nine months, product enhancements, decent fundamentals, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 28.00, down by 0.07% as of May 18, 2021.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

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