The IDP Education Ltd (ASX: IEL) share price could be great value after recent weakness.
That's the view of analysts at Bell Potter, which have just upgraded this beaten down ASX 200 share.
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What is the broker saying about this ASX 200 share?
According to the note, the broker has revised its earnings estimates lower to reflect the loss of its monopoly in Canada's student visa language testing. It said:
We revise our forecasts for this announcement, noting that our English language testing volumes were already conservative factoring in lost IELTS market share in both India and Canada. We assume market share losses of ~30% in the Canada SDS market or ~110k tests and an additional ~50k in other markets. The net result is flat IELTS volume growth in FY24e and 5% growth in FY25e. […] We have also slightly increased our opex in FY24 to account for higher expected marketing spend. The net result was EPS downgrades of -7.0% and -7.4% in FY24-25e. We have also modestly reduced our DPS forecasts by ~-4.3% in FY24e and FY25e.
However, despite this, Bell Potter is still forecasting very strong earnings growth over the coming years from the ASX 200 share. Its earnings per share growth estimates are 47%, 20%, and 25% for FY 2023-25.
In light of this positive growth outlook, the broker believes IDP Education is attractively priced now. It concludes:
We have updated each valuation used in the determination of our price target for the forecast changes as well as market movements and time creep. There are no changes to the multiple we apply in our EV/EBIT valuation of 29.1x or WACC of 8.0% in our DCF valuation. The net result is a -8.7% decrease in our PT to $27.40 which is a >15% premium to the current share price so we upgrade our recommendation to a Buy. Whilst this is not positive news for the Company, we had already factored in some market share losses and still anticipate strong growth in the student placement business driven by structural tailwinds and product innovation.
Bell Potter's price target of $27.40 implies potential upside of almost 26% for investors over the next 12 months from current levels.
