There's no denying that education is essential to the advancement of society. It plays a crucial role in fostering social development and mobility.
With governments failing to fully meet the growing demand for better education platforms, the result is a rapidly expanding private education market in Australia.
What are ASX education shares?
Companies involved in education services and listed on the Australian Securities Exchange are ASX education shares. This covers everything from primary school to postgraduate and online study.
ASX education stocks can represent many services, including providing digital testing, placing international students in schools, providing tertiary education courses, and tutoring primary school-age children in maths and English.
Why invest in them?
Digital initiatives that gained ground due to the COVID-19 pandemic have disrupted the education industry.
Changes such as remote learning, cloud-based business models, and interactive technology tools impact educational institutions just as much as commercial organisations.
The industry expects the learning experience to evolve quickly thanks to the increased use of virtual reality, blended learning delivery models, and software-as-a-service (SaaS) learning applications.
Governments across Australia invested in education initiatives during the pandemic to help workers avoid long-term unemployment. ASX education stocks stand to benefit from this and the adoption of education technology over the longer term.
Online learning has become a booming industry in response to the pandemic. This exposes education companies to some exciting and profitable business opportunities.
Top education stocks on the ASX
There are about a dozen companies in education services listed on the ASX in the consumer discretionary sector, of which a number have small valuations.
Here are three top education stocks ranked by market capitalisation from high to low.
|IDP Education Ltd |
|Provides student services to help international pupils study in English-|
|G8 Education Ltd |
|One of Australia's largest providers of early childhood education and care, with|
more than 430 early learning centres across 21 brands
|3P Learning Ltd |
|Provider of online learning for school-aged children, with programs covering |
mathematics, literacy, and reading skills
This company provides student services to help international pupils study in English-language countries. IDP Education offers education guidance, placement services, and English-language testing and teaching. It operates in more than 80 countries, its websites attracting 100 million visits per year.
IDP Education reported record revenue in FY23 of $982 million, an increase of 22% on FY22. This was driven by solid student placement revenue growth, with student placement volumes up 53%. Net profit after tax (NPAT) increased 45% to $149.1 million.
The company expanded its physical presence, adding 46 offices during the financial year through organic expansion and the acquisition of Intake Education. Intake Education is a student placement agency with operations across Nigeria, Ghana, Kenya, the Philippines, Thailand, Taiwan, India and the UK. IDP also acquired The Ambassador Platform in FY23, a UK-based student peer-to-peer platform.
G8 Education runs early childhood education and daycare centres across Australia. Operating 21 brands, the company runs more than 430 early learning centres with 46,000 children attending daily.
In the first half of 2023, G8 reported a 9.3% increase in revenue thanks to improved operational performance. Sector-wide workforce shortages, which constrain occupancy rates, remain the industry's most significant issue.
Despite inflationary pressures, G8 reports that overall demand for childcare is improving and that the long-term demand fundamentals for the sector remain attractive.
Throughout 2023, G8 has proactively reviewed its portfolio of childcare centres, aiming to exit underperforming centres. In October, the company announced plans to sell 31 centres across various states, following five exits in the first half of 2023.
3P Learning is a market leader in EdTech reading, writing, and mathematics programs. More than 5.5 million students in over 150 countries use its products, which include Mathseeds, Writing Legends, Reading Eggs, Mathletics, and Brightpath
3P Learning's focus in FY23 was on building the product, people and process capabilities required to position the company as the premier EdTech company for core skills of reading, writing, and maths. The company balanced increased investment in products against good profitability and generation. Revenue for FY23 was $107.4 million, up 10%, and earnings before interest tax depreciation and amortisation (EBITDA) climbed 21% to $15.9 million.
In FY24, the company will look to grow revenue and cash flows with new products and existing product enhancements while maintaining cost control discipline. 3P Learning has provided guidance for revenue of $112 – $115 million in FY24, with EBITDA between $15 million and $17 million.
What to look for when buying ASX education shares
Education is a significant Australian export, with the onshore education sector forecast to grow at a compound annual growth rate (CAGR) of 3.8% to 2025.1
Companies within the education sector are diverse, offering various physical and online services. Education technology has gained momentum due to the pandemic, which presents the education sector with unique challenges and opportunities.
Investors in this space should look for businesses with a distinct product/service offering with high profitability potential.
Learning institutions evolved tremendously throughout the COVID-19 pandemic. The industry has much to gain from the effective adoption of digital environments and appropriate tools, including learning applications delivered via a SaaS model, blended delivery models combining remote and in-person learning, and increased use of virtual reality.
Education tech stocks such as 3P Learning Ltd and OpenLearning Ltd (ASX: OLL), which provide online educational programs, may benefit from these developments.
Pros of investing in education
Investments that make a difference: Investing in education offers the opportunity to invest in companies that can make a difference in their customers' life outcomes while growing your wealth at the same time.
International student market recovery: The COVID-19 pandemic seriously impacted education businesses that relied on the movement of international students. Now that open travel has resumed across borders, international students can pursue their overseas education dreams again.
And the cons
Volatility: Like most shares listed on the ASX, education shares can be volatile, which means share prices can move up and down.
Intrinsic values can be difficult to estimate: It can be hard to accurately discern the inherent value of education companies, as intangible and unpredictable factors such as evolving market competition can impact value.
Are ASX education shares a good investment?
Whether ASX education shares are a good investment depends on your financial situation and investment goals. ASX education shares are diverse, offering various services that different factors can impact.
Population growth is the primary driver of demand for education, particularly in the five-to-18-year demographic. The underlying demand for tertiary education has also increased as people look to upskill.
Share trading in education bears the same risks as investing in the broader stock market. Financial markets can be unpredictable, but investing in education shares can provide both dividend payments and capital growth.
However, past performance does not indicate future performance, so seek professional advice if you are unsure about investing money in the education sector.