2U Can Grow Revenue Over 30% a Year
barrons.com
The education-tech firm has the vision, market opportunity and leadership to execute its financial goals.
Tuesday, 2U hosted its inaugural analyst day in New York, where management highlighted the company’s strategic goals and competitive differentiation, as well as the growing acceptance of online education.
We came away from the event even more confident that 2U (ticker: TWOU) has the vision, market opportunity and leadership to execute against its near- and long-term financial goals. We continue to believe that the traditional higher-education market is poised for disruption, as evidenced by a strong uptick in demand from both new and existing university partners, which prompted management to recently raise its 2017 launch target to 10 new programs.
Management introduced a three-year financial outlook, which called for more than 30% year-over-year annual revenue growth (versus current consensus of 30.8%/29.5% year-over-year growth for 2017/2018, respectively) and low single-digit percentage adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) margin expansion (versus Wall Street of just 110/140 basis-points growth, respectively).
2U remains one of our Top Picks, and we remain highly confident that 2U is well positioned to achieve management’s more-than 30% revenue compounded annualized growth rate (CAGR) outlook for the foreseeable future, while simultaneously increasing profits. Our $43 target price implies a 2017 estimated enterprise value (EV)/sales multiple of 7.5 times. |
