Following an announcement that it would acquire eight new childcare centres for $12 million earlier this week, shares of G8 Education Ltd (ASX: GEM) have drifted mostly sideways.
Although it appeared to be a mostly positive market update, and takes the number of daily places it offers to children to over 35,000, analysts at Canaccord Genuity have cut their price target on its shares by 6%.
Whilst that may sound disheartening, the global investment bank now has a $6.81 price target on the stock, according to Dow Jones Newswires. G8 Education shares currently trade around $3.75 – implying a potential share price upside of more than 80%!
Moreover, the consensus price target amongst analysts polled by the Wall Street Journal is currently $5.28, with seven analysts rating it as a buy. Just one analyst has a sell rating on G8 Education shares.
Undoubtedly, there are risks to the company's acquisitive growth strategy. Overpaying for new centres, decreasing occupancy rates and burgeoning debt levels, are some examples.
However, as Motley Fool writer, Ryan Newman, wrote earlier this week, "Whilst every aggregation strategy carries its share of risk; G8 Education has thus far proven its ability to improve operations within its centres whilst also managing to decrease staff turnover and increase profits."
An expanding network of centres, increased prices for childcare services and stimulus from the recent federal budget, all point to a more profitable future for G8 Education.
Is it time to buy G8 Education shares?
I think G8 Education shares are priced for buyers at this time. Whilst a number of risks persist, so long as it is part of a well-diversified portfolio investors could do worse than add some exposure to the company for its growth potential and dividend yield.
