The IDP Education Ltd (ASX: IEL) share price has been steadily increasing since 2015. Throughout 2018, IDP's share price started to gain momentum and finished the year close to its all-time high of $15.07.
This momentum increased into 2019 where IDP's share price skyrocketed by 21% off a strong half-year announcement released in February. Currently, IDP's share price trades slightly below $15 and I believe that the 21% gain in share price earlier this year could soon be overshadowed.
Brief background on IDP
IDP Education is an international educational organisation which primarily assists students interested in tertiary study at various locations around the world. Current placement locations include Australia, New Zealand, United States, United Kingdom, Ireland and Canada. With some of the best universities located in those regions, it's no surprise why students would seek IDP's assistance.
Additionally, IDP owns a majority of the IELTS language test which is the most common English test sat by students that wish to study in one of the countries listed above.
Why IDP short sellers could be punished
From the recent half-year announcement, IDP reported a substantial increase in all areas of its business. Revenue was up 26%, EBITDA was up 33% and the interim dividend was up 41%. These set of numbers have been one of IDP's best. To sweeten the deal, there was an increase in the IELTS test takers by 18% which allowed IDP to break a record in its test volumes recorded.
Despite IDP trading close to 67 times earnings based on the recent EPS figures, it's still cheaper than many other growth companies when IDP's growth is accounted for. By factoring in growth using a PE to ROE valuation, a value of 1.43 is obtained. Therefore, it becomes evident that IDP's share price shows reasonable value and is very much capable of increasing further. Short sellers won't be comfortable with such a scenario.
With the E7 economies becoming stronger over time, parents from those countries will place a larger emphasis on their children's tertiary education and encourage them to study at world-class institutions. This trend gives IDP an even stronger tailwind than it already has.
Now, do you see why the 21% gain in share price could soon be overshadowed?
Foolish takeaway
With a strong performance across all sectors and the tailwinds that IDP Education has, it's hard to see how IDP Education's share price will be slowing down anytime soon.
