Navitas Limited reports $40.4 million profit: Could now be the best time to buy?

Navitas Limited (ASX:NVT) has reaffirmed full year guidance.

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What: Leading university pathways educator Navitas Limited (ASX: NVT) has fallen around 4% today after reporting a solid set of interim results. The group achieved a 14% increase in revenue to $480.5 million and a 12% increase in net profit after tax to $40.4 million, which equated to an 11% increase in earnings per share (excluding goodwill impairment) of 10.7 cents per share (cps). Shareholders will also receive a fully franked interim dividend of 9.4 cps which is in line with the prior corresponding period.

So What: The solid, double-digit results are an important milestone for Navitas after the high-flying business shocked the market in July last year when it announced that a long-term agreement with Macquarie University to provide pathway programs would be ending in 2016. The announcement sent the share price tumbling 30% to around $5 – a level it remains trading near today.

Now What: Today's results go some way to re-affirming investors' confidence in the company, however, even at $5 a share the stock is still arguably priced for perfection with high growth required to support the lofty price-to-earnings (PE) multiple. Based on the low end of management's full year guidance for earnings before interest, tax, depreciation and amortisation (EBITDA) of $162 million, the stock is trading on a PE of 21x.

Navitas remains a high-quality business and would be a welcome addition to many long-term portfolios if it was available at an appealing price. Given the high multiple the company trades on relative to the low-to-mid-double digit earnings growth profile, conservative investors may be best off leaving this one on their watch list for the time being.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.  

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