Is Navitas Limited a screaming bargain?

Navitas Limited (ASX:NVT) is trading near its 52-week low. Is now the time to jump in?

a woman

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Navitas Limited (ASX: NVT) fell over 17% last week after it reported a 13% fall in first half net profits. The driver of this fall however is a goodwill impairment – if we look at the underlying figures then net profit increased by 12%.

There's a lot to like about the stock. The company believes there is a significant shortfall in tertiary education places among our Asia-Pacific neighbours, especially China. Given the proximity and prestige of Australian universities in the region Australia will likely continue to be the destination of choice. This provides a huge opportunity for the company to help these students adjust to life and study in Australia via their highly rated university pathway programs.

In addition, the recent slide in the Australian dollar will further incentivise international students (and their parents) to choose Australia for tertiary studies. This is likely to be a significant boost for Navitas since it generates nearly 70% of revenues from Australia.

Outside of Australia the company is targeting the US as a key growth market in both the university program and SAE division, but SAE is the most lucrative. SAE is currently a provider of audio technology diplomas in six US states, but will expand its offerings to associate and bachelor degrees across multiple creative media disciplines. This will see the division's addressable market jump from $100 million to $4.1 billion. The 27% increase in first half revenues is an exciting indication of things to come.

As part of its plans to capture the growth areas identified, Navitas is in the process of rolling out recommendations from its marketing review. With the knowledge that agents are the most influential in helping international students decide on a suitable institution, the company is looking to better leverage its recruitment network by increasing the presence of in-country agents.

The above changes to the sales division are just one of several initiatives to improve efficiency and capabilities that will allow Navitas to achieve its goals. At a P/E of nearly 21x most people would not consider the stock cheap. However favourable Australian legislative changes that will potentially be enacted in 2016, along with the potential growth from its university programs means the stock could turn out to be a bargain in five years' time.

Whilst Navitas might be a winner, The Motley Fool's analysts have just uncovered a top stock that you need to know about, check out what it is.

Motley Fool contributor Simon Chan does not own shares in any of the companies mentioned in this article.

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