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)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

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.

BioDelivery Sciences International, Inc.

BDSI Details

BioDelivery Sciences International, Inc. (NASDAQ: BDSI) is a specialty pharmaceutical company that provides pioneering therapies for individual living and chronic conditions. The company utilizes its proprietary BioErodible MucoAdhesive ("BEMA") drug-delivery technology to manufacture and commercialize new therapies for unmet medical needs. The company operates in one segment, i.e., product sales. The company product portfolio includes Belbuca and Symproic. As of May 18, 2021, the company’s market capitalization stood at USD 359.72 million.

Announced USD 25 Million Share Repurchase Program: On November 4, 2020, the company announced the repurchase of USD 25 million shares of the company’s common stock. The company planned to utilize its existing cash on hand to fund the repurchase program. During the Q1FY21, a cumulative total of 1,578,144 shares, with a weighted average price of USD 3.87, were repurchased and reported as treasury stocks for a total value of USD 6.10 million.

Operating Cash Flow Growth (Source: Earnings Presentation, May 6, 2021)

Q1FY21 Results: The company reported a 7.16% increase in total revenue to USD 41.02 million in Q1FY21 (ending March 31, 2021) compared to USD 38.27 million in Q1FY20, primarily driven by an increase in the paid prescription of Belbuca and Symproic products across all business channels. The Belbuca product contributed 89.21%, while the Symproic product contributes 10.79% of the net product sales in Q1FY21. The company reported an increase in net income to USD 5.23 million in Q1FY21 compared to USD 4.96 million in Q1FY20.

Key Risks: If the company's competitors are successful in obtaining approval for Abbreviated New Drug Application (ANDA) for products with the same active ingredients as Belbuca and Symproic, the company’s operational and financial state of affairs could be impacted negatively. In FY20 and FY19, 67% of the company’s revenue came from its top two customers. Excessive dependence on a few customers for sales can hamper the company’s financial strength in the future.

Outlook: For FY21, the company expects its total sales to be in the range of USD 170 million to USD 180 million. BDSI is projecting its total sales from the Belbuca product to USD 155 million to USD 165 million for FY21. The company is also forecasting its EBITDA to be in the range of USD 40 million to USD 50 million.

FY21 Guidance (Source: Earnings Presentation, May 6, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

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

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

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

Stock Recommendation: BDSI has declined 28.37% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 3.04 to USD 5.45. 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 4.21. On the technical chart, the next support level is USD 3.20. Considering the significant correction in the stock price in the past nine months, high EBITDA margins, growth in cash flow, decent fundamentals, and risks associated with the company, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 3.61, down by 1.10% 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 levelsm