Why has IDP Education (ASX:IEL) share price risen 33% in the last 12 months?

It's been a long road back for IDP Education Ltd (ASX: IEL) after the education provider was hit hard by COVID-19 last year.

IDP provides international student placement services and English language testing services.  Although the company has been starved of its staple — international students — the IDP Education share price has climbed almost 33% in the past 12 months.  

One school of thought among analysts says that the longer the pandemic drags out, the stronger the IDP Education market position will be at the end of it. This is because many smaller competitors will fail to survive the crisis. Commentators are confident that the industry will rebound for those with strong balance sheets.

Foundations there to take advantage of a rebound

Although down on most performance metrics, IDP Education's half-yearly report said that English language testing volumes were broadly in line with those experienced in the final month of 2019 before the pandemic. In fact, International English Language Testing System (IELTS) volumes rebounded from April/May lows to record a 49% increase.

The company told the recent Macquarie Australia Conference presentation that IELTS performance was an indicator for the health of the industry.

IDP Education also noted that a strong balance sheet of $299m and undrawn working capital facilities provided the foundations for further investment. The company is also planning to expand staff and increase marketing spend to drive future performance.

IDP Education stated that: 

With unmatched services, global footprint and data insights, our teams are ready to lead the industry rebound.

Brokers back IDP Education

Morgans is expecting IDP Education to grow its market share meaningfully once the pandemic passes. The broker remains positive for the company, placing an add rating and $28.48 price target on its shares.

Goldman Sachs also believes that IDP Education will be in a strong position when conditions return to normal thanks to its strong balance sheet and access to capital markets.

IDP Education share price snapshot

It's been a long road back for IDP Education shares after the price crashed to $11.56 in March last year. The IDP Education share price peaked at $28.41 in February 2021 and is trading at $22.81 at the time of writing.

Despite the optimism for a rebound, IDP Education currently has a price to earnings (PE) ratio of 86.43, which means that the share is priced at an optimum. The Australian Consumer Services industry average PE ratio is 22.