Shares in leading Australian education provider Navitas Limited (ASX:NVT) have soared by almost 40% over the past 12 months and currently sit near the company's all-time high share price of $7.74. However, is it too late to buy or is the stock set for future growth?
Navitas is a leading provider of pre-university and university pathway programs, mainly to Asian and Australian students, however also increasingly to non-English speaking students in the United Kingdom, Canada, Singapore and the United States. Since listing in 2004 on the ASX, the company has expanded rapidly and increased profits substantially. The company has seen student numbers compound at an impressive annual rate of 25%. Navitas has strong partnerships with universities and agents and therefore has a strong competitive position.
The company recently received confirmation of the renewal of important government contracts in Australia and also reported strong growth in student enrolments during the first semester of 2014. Analysts have forecast earnings growth of between 7-9% for FY14, however the company is currently spending heavily on capital to drive future growth with earnings forecast to increase substantially from FY15 onwards.
The company is set to benefit from some favourable tailwinds, including growing Asian demand for western education which provides the company with huge upside potential. The low capital nature of the business allows the company to generate strong cash flows and distribute the majority of earnings to shareholders.
Navitas is a quality company which would suit the portfolio of growth-oriented investors. The company is set to grow earnings at a strong rate over the long-term. While the company does appear a little expensive at the current price, trading on 37 times earnings, investors should do well over the long term. Investors looking for further exposure to the education sector should also consider purchasing SEEK Limited (ASX: SEK) at current prices which also should provide strong growth over the long term.
