It hit the ASX boards in November 2015 at just $2.65 per share to mean it’s up 5.8x thanks to some strong revenue, profit, and dividend growth as a public business.
I must admit to being wrong so far in my sense that it’s not an investment grade business based largely on the business model of earning fees from repeat English language or IELTS testing that makes up near to 60% of its revenue stream currently.
A lot of its success is based on volume growth in the IELTs testing space, with bulls claiming the tailwind of ever more students requiring English language skills could support the business long into the future.
On top of the profit growth the company has also enjoyed an earnings multiple re-rating as positive sentiment around the business peaks with it now trading on 47x annualised adjusted earnings per share of 33 cents (adjusted half year EPS came in at 16.6 cents).
It has also paid 18.5 cents per share in dividends over the past year to place it on a trailing yield of 1.2%.
According to the Wall Street Journal analysts have a median share price target of $14.35 on IDP shares, with a high estimate of $16. Four out of the eight analysts polled are sitting on the fence with a ‘hold’ rating, while 2 rate it a ‘buy’ versus ‘one’ sell rating.
Personally, I’m more than happy to sit out IDP Education’s rise and definitely would not be tempted to buy shares at these kind of elevated valuations usually reserved for hot technology or software businesses.
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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 Scott Phillips.