Should you buy Navitas Limited today?

Navitas Limited (ASX:NVT) is a great business which has been on my watchlist, but could be set to move to my buy list.

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What: Leading university pathways education provider Navitas Limited (ASX: NVT) has lost some of its "growth" lustre in the past year.

While the stock has managed to steady itself and is actually up around 3% over the past six months, it is down a whopping 35% compared with a 3% gain from S&P ASX 200 index.

So What: The severe underperformance in Navitas' share price has made it a key stock for my watchlist as this is a high quality business with plenty of growth options still available to it. Therefore, any opportunity to purchase at an appealing price level would make for a welcome addition to my portfolio.

Now What: While the news flow from the group has been mixed over the past year, with the market reacting negatively to news of moderating growth in the company's University Programs, there have also been plenty of positive announcements.

Just last week for instance Navitas announced an agreement with the University of Canberra (UC) to acquire a 51% equity interest in an existing pathway college located on UC's main campus. While in April, Navitas announced a joint venture with the University of Western Sydney to establish a pathway college for international students. Couple the company specific growth opportunities with the tailwind of increased spending on education globally (Navitas is a global business) and you have an appealing mix.

With Navitas forecast to grow earnings per share to 28.4 cents per share by 2016 and to pay out 100% of earnings (according to data from Thomson Consensus Estimates), the stock is trading on an implied price-to-earnings ratio of roughly 17x and with a fully franked dividend yield of approximately 6%. These measures look quite attractive on both a relative-to-market and absolute basis.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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