We recently compiled a list of the 7 Best Education Stocks To Invest In Now. In this article, we are going to take a look at where Adtalem Global Education Inc. (NYSE:ATGE) stands against the other education stocks.
Is the Education Sector Poised for Growth?
The education sector is undergoing a transformative phase, driven by technological advancements and shifting learning paradigms. The rise of online learning platforms and educational technology has reshaped how students and professionals access knowledge, creating a dynamic environment ripe for investment. With the global education market projected to grow significantly, now is an opportune time for investors to explore leading education stocks that are well-positioned to capitalize on these trends.
The education industry is not just about traditional institutions anymore, it encompasses a range of companies that provide innovative solutions, from online courses to tutoring services. By 2030, the market is expected to reach a staggering $10 trillion, representing over 6% of global GDP, as reported by HolonIQ by QS. This growth is fueled by a projected increase of 350 million post-secondary graduates and nearly 800 million more K-12 graduates worldwide. Asia and Africa are leading this expansion. To accommodate this student surge, the world will need to add an average of 1.5 million teachers per year, reaching 100 million teachers by 2030. Of these, 50% will be teaching pre-K and primary education. Post-secondary teaching will undergo a particularly significant transformation. The role of the teacher will evolve from a traditional role to a more mentorship-oriented approach. The K-12 education market is projected to exceed $5 trillion by 2030, reflecting the growing importance of early education and the need for a skilled workforce.
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According to market.us, the global EdTech market is projected to experience substantial growth, expanding from $220.5 billion in 2023 to $810.3 billion by 2033, with a compound annual growth rate of 13.9%. North America currently dominates the market, accounting for over 37.3% of the total revenue in 2023, reaching $82.24 billion.
AI, being the hot topic for almost all industries today, has seen increasing adoption across various sectors, significantly impacting the Edtech industry. The EdTech software industry is highly competitive, with 65,000+ companies vying for market share. Over 67% of recent EdTech unicorns incorporate AI in their products and services. A good example of such a company includes Squirrel AI, a leading Chinese AI startup, that offers personalized education solutions. Leveraging a vast student database and advanced AI algorithms developed in collaboration with YiXue Education, Squirrel AI provides adaptive assessments and tailored learning paths. The company has raised $190.4 million in funding since it was founded in 2014. It has received significant recognition, including the GITEX Best Education Technology Award in 2019 and the $1 million Artificial Intelligence for the Benefit of Humanity prize in 2021.
As educational institutions recognize the importance of integrating AI into their curricula, programs like Udacity’s AI Nanodegree are becoming essential for equipping future leaders with the necessary skills. The growing reliance on AI technologies underscores a shift towards more innovative and efficient educational practices, promising substantial returns as these trends continue to unfold. This trend, together with the robust performance of EdTech, underscores the overall growth trajectory of the education sector, fueled by rising demand for innovative educational solutions and a shift towards online learning platforms. This article will delve into the 7 best education stocks to invest in now that demonstrate robust financial performance and align with current market trends.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 15 education stocks with high market caps. We then selected the 7 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of students in a lecture hall, with a professor lecturing to them in the forefront.
Adtalem Global Education Inc. (NYSE:ATGE)
Market Cap as of October 22: $2.72 billion
Number of Hedge Fund Holders: 23
Adtalem Global Education Inc. (NYSE:ATGE) operates several for-profit higher education institutions and is a leading provider of post-secondary education, specializing in healthcare and professional fields. It operates through its subsidiaries, including Chamberlain University, Walden University, and Ross University, offering a variety of degree programs and certifications. It focuses on providing students with the knowledge and skills needed to succeed in their chosen careers while addressing workforce demands in healthcare and other industries.
In the fourth quarter of fiscal 2024, the company demonstrated strong financial performance, with revenue increasing 12.41% year-over-year to generate $409.91 million. Total revenues for FY2024 improved by 9.2% to $1.58 billion. Enrollment also rebounded, with total enrollment returning to pre-pandemic levels and increasing 10% year-over-year in FQ4.
To further strengthen its position, the company undertook several strategic initiatives. Chamberlain University expanded its presence by opening a new campus in Phoenix and announcing plans to enter the Kansas City market. Additionally, Chamberlain partnered with the American Association of Critical Care Nurses to offer a new specialty-focused program. Walden University also made significant strides, redesigning its website for a more streamlined experience and continuing to address nursing labor shortages through its MSN program. The university also focused on tackling the middle health crisis through its counseling, psychology, social work, and human services programs.
The company anticipates another successful year in fiscal year 2025, projecting revenue between $1.66 billion and $1.7 billion and adjusted earnings per share ranging from $5.60 to $5.85. This positive outlook is attributed to the dedication and hard work of its nearly 10,000 colleagues, who are committed to serving students and making a positive impact on society.
Ariel Fund stated the following regarding Adtalem Global Education Inc. (NYSE:ATGE) in its Q2 2024 investor letter:
“Some holdings in the portfolio advanced considerably this quarter. Shares of global leader in for-profit education, Adtalem Global Education Inc. (NYSE:ATGE), jumped following a robust quarterly earnings beat, accelerating new student enrollment growth and a subsequent raise in full year guidance. Revenue per student also came in better than expected on tuition increases and higher credit hours. Meanwhile, we remain encouraged by management’s solid execution of remediation initiatives at the medical and veterinary schools, where revenue growth outperformed and total enrollment trends are improving. As the number one grantor of nursing degrees in the U.S. and the largest producer of African American MDs, PhDs and nurses in the country, we remain confident ATGE will benefit from the healthcare worker shortage in the U.S.”
Overall ATGE ranks 7th on our list of the best education stocks to invest in. While we acknowledge the potential of ATGE as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ATGE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
