Why did the G8 Education (ASX:GEM) share price lift today?

This childcare provider is weathering the COVID-19 storm

| More on:
tiny asx share price growth represented by little girl looking surprised

Image source: Getty Images

The G8 Education Ltd (ASX: GEM) share price closed in the green today following the company release of a financial update.

After surging to an intraday high of $1.135 in early trade, shares dropped to $1.09 before bouncing back to $1.10 at the close of trade. This was a 0.46% gain on Friday’s closing price.

G8 Education is an early childhood education provider that has experienced 119 temporary centre closures since the start of the COVID-19 pandemic.

What was in today’s update?

G8 Education reported earnings before interest and tax of $76 million and a net profit after tax of $43 million in the calendar year to date.

This result was above the consensus estimates on company earnings for the 2021 year.

The childcare provider also reported an increase in its occupancy rate of 76.5%. This was an improvement of 1.7% on the calendar year 2020 but 2.1% below the 2019 result.

Net debt for the company was $17 million after the provider forked out $38 million in wage remediation payments.

G8 Education informed investors its revenue was impacted by parent gap fee waivers when children cannot attend due to COVID-19 restrictions.

However, the government was able to offset this loss with fee waivers.

The company said it lost $3,300 per day on average as a result of COVID-19 closures.

What else is new?

Allan Gray portfolio manager Dr Suhas Nayak has tipped G8 Education as one of 4 ASX shares tipped for buybacks in 2022.

Nayak told Motley Fool Australia today that the company’s best course of action may well be to return cash to shareholders via a buy-back, while also improving underlying operations of existing centres.

He noted earnings that while not yet fully recovered, the company was now in a net cash position and the share price was below its peers.

G8 education share price snapshot

The G8 Education share price has slipped 6.78% in the year to date and is down 8.33% in the past 12 months.

The company has a market capitalisation of about $932 million, based on the current share price.

Should you invest $1,000 in G8 Education right now?

Before you consider G8 Education, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and G8 Education wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers