Why the 3P Learning Ltd share price is soaring higher today

Shares in school age online education business 3P Learning Ltd (ASX: 3PL) are around 8 per cent higher in afternoon trade, despite the company releasing no specific news to the market. The business currently has around 17,500 schools globally signed up to its online learning products that include Mathletics, Spellodrome and Reading Eggs.

Once considered one of the ASX’s hottest tech stocks, 3P Learning has been in the doghouse with investors ever since it posted falling profits for the six-month period ending December 31 2015. The company blamed the disappointing result and slowing growth on increased investments in sales staff alongside pricing pressure on its products amidst a competitive environment.

As a result of the increased costs core underlying EBITDA dropped 21 per cent to $13.3 million for the full year ending June 30 2016 as the stock hit a record low of 62 cents versus its July 2014 IPO price of $2.50 a share. Notably investment management giant and substantial shareholder Macquarie Group Ltd (ASX: MQG) almost immediately dumped its shares in the business post IPO, alongside other insiders. After this red flag it was pretty much all downhill for the share price as the business started to reveal results that investors were not expecting.

It posted underlying earnings per share of 3.9 cents in FY16 that would place it on around 25x trailing earnings, which is a lofty ratio that reflects management’s forecasts and investor expectations for strong earnings growth in FY17. It has a 3-year strategic plan beginning in FY17 that it expects to produce accelerating revenue growth in FY18 and FY19.


Much will depend on whether the business can meet its forecasts this time around and given the poor track record as a public company this looks a stock to watch from the sidelines for now. However, its scalability and global growth potential mean it remains an interesting prospect for small-cap enthusiasts.

Others in the online education space include micro-cap family-run operator Kip McGrath Education Centres Limited (ASX: KME), and English language testing business Idp Education Ltd (ASX: IEL). The latter I am not keen on due to its business model, while Kip McGrath looks reasonable value but remains high-risk and for experienced investors only.

If you are interested in quality dividend shares, then I would recommend this top dividend share instead. A strong yield and potential share price gains make this a great investment idea in my opinion.

Our Top Dividend Stock for 2016

Our resident dividend expert names his Top Dividend Share for 2016. Not only are the shares dirt cheap, the company is trading on a fat fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required!

Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.