On Friday, the Fairfax Press reported that analysts at fund manager WaveStone Capital believe IDP Education Limited (ASX: IEL) is a stock that will do well, as its direct exposure to global growth in international students drives earnings higher.

Although the stock has jumped 37% since I wrote about it here, I believe the company presents a compelling investment case for the following three reasons:

1. Company fundamentals

IDP Education is a spin-off of SEEK Limited (ASX: SEK) and listed on the ASX in December 2015 at $2.65 per share. The stock is 50% owned by Education Australia (a co-operative of 38 Australian universities) and has strong ties to education industry bodies.

IDP specialises in three key segments marketed towards international students; namely, student placement services, IELTS testing and English language teaching.

Broadly put, IDP Education provides a vertically integrated offering to connect international students with leading Australian universities. It assists students find a place at university, including preparation of application, immigration and accommodation forms as well as providing ancillary services such as training students for English studies through industry-leading IELTS testing and English language schools.

All up, these fundamentals give it a stranglehold over the international student placement market in Australia.

2. Market outlook

According to IBISworld, the student placement market is a lucrative one. IBISWorld forecasts that the number of foreign students will increase over the five years through 2020-21, boosting demand for IDP Education’s services.

On current trends, the education and training industry is expected to grow at 7.5% this year, followed by an average growth rate of 4.3% over the next five years. Given the education industry is valued at $119.2 billion (by turnover), even if IDP Education can secure a small percentage of this growth, I believe its shares will be worth a lot more than their current $1.15 billion market capitalisation.

Accordingly, the company has the right tailwinds for growth.

3. Company financials

Based on IDP Education’s full-year 2016 results, it appears to be making the most of these favourable conditions. The company reported revenue growth of 17% compared to prior year, with net profit after tax (NPAT) up 32% to $39.9 million.

Pleasingly, the results exceeded prospectus forecasts for earnings (EBIT) and NPAT by 6% and 12% respectively on the back of increased fee revenue and placement volumes. This indicates the group has experienced headline growth through extra demand and pricing power. These are two trends almost non-existent in blue-chip companies like Commonwealth Bank of Australia (ASX: CBA) and BHP Billiton Limited (ASX: BHP).

Foolish takeaway

With IDP Education’s shares changing hands at a touch under $4.70 per share, the company demands a price-earnings multiple of almost 30x. Although management will pay a partially-franked final dividend of 5.5 cents on 30 September, the implied annualised yield of 2.5% won’t do much to support its share price in current conditions.

Therefore, investors buying IDP Education at current prices are doing so on the premise that management can deliver on its promises.

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Motley Fool contributor Rachit Dudhwala 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.