The IDP Education Ltd (ASX: IEL) share price has rallied into all-time highs this month despite ongoing disruptions to its international student placement and English language testing services.
The company released its FY21 full-year results on 25 August, where it revealed that revenues slipped 10% to $528.7 million and adjusted net profit after tax dropped 36% to $45 million.
Despite a weak financial performance, the IDP share price is up 20% in the past month and up 58% year-to-date.
In an article featured on Livewire, Nathan Hughes from Perpetual Limited (ASX: PPT) and Mike Murray from Australian Ethical Investment Limited (ASX: AEF) both struggled to justify the company’s valuation.
Why experts think the IDP share price is too expensive
Murray could see why investors might want to buy IDP shares when the economy and international borders eventually reopen.
“There’s no doubt they will get very good growth as part of a reopening trade,” he said.
However, the price tag that comes along with the IDP share price was simply too expensive to ignore.
“We’ve always just struggled with valuation with this name. I think you’re probably paying about 50 times, even on recovered earnings. They certainly have shown a good degree of resilience through the downturn. I think it’s a quality business, but it’s a sell for us.”
Hughes held the same view, but pointed out that he’s been on the “wrong side of this stock, pretty much since the day it listed.”
Funnily enough, the IDP share price has boomed more than 800% since listing in November 2015.
Hughes highlighted a number of positive factors about the business, citing that it is a “tremendous growth story and obviously has a lot of desirable attributes, great market share, great balance sheet, generates a tonne of cashflow.”
Unfortunately, the hefty price tag was something that just didn’t add up.