On Tuesday, B.Riley Financial increased its price target for American Public Education (NASDAQ:APEI) to $16.00, up from the previous $15.00, while reiterating a Buy rating on the stock. The firm's optimism is based on an anticipated enrollment recovery at Rasmussen University and a pathway to operational stability for the education provider.
The firm expects American Public Education to meet its first-quarter 2024 revenue and adjusted EBITDA estimates of $154 million and $8.8 million, respectively. These figures are in line with the consensus estimates of $152 million in revenue and $9 million in adjusted EBITDA. The expected results are supported by an increase in average net course registrations, which are projected to reach approximately 97.7 thousand, marking a low single-digit year-over-year growth.
Despite challenges in the first quarter, including ongoing nursing enrollment issues at Rasmussen University, American Public Education is anticipated to demonstrate progress in resolving recent issues during the upcoming earnings call.
Previously, the company had forecast positive enrollment momentum for the American Public University System (APUS) and Hondros College of Nursing (HCN), with increases of 1.5% and 19%, respectively. However, Rasmussen was expected to see a 10% year-over-year enrollment decline, due to stricter admissions policies and imposed enrollment caps.
The firm believes that enrollment pressures have begun to ease in the first quarter, aided by cost reductions and enrollment and operational improvements initiated in the second quarter of 2023.
Looking forward, B.Riley forecasts a recovery for American Public Education from its Rasmussen enrollment pressures and higher costs, with projected full-year 2024 revenue and adjusted EBITDA of $611 million and $61 million, respectively.
In terms of valuation, American Public Education is currently trading at an attractive multiple of 3.5 times its projected 2024 adjusted EBITDA, which reflects the various challenges the company has faced.
Nonetheless, due to its profitability, stable balance sheet, and solid core business, including a steady military segment, B.Riley maintains its Buy rating and increases the price target to $16, based on 4 times the projected 2024 adjusted EBITDA.
InvestingPro Insights
In light of B.Riley Financial's updated price target and optimistic outlook for American Public Education, current InvestingPro data provides additional context for investors considering APEI stock. With a market cap of $242.13 million, the company's valuation reflects a complex picture. Despite a negative P/E ratio over the last twelve months, analysts anticipate net income growth this year. This expectation aligns with the firm's projection of operational stability and a recovery in enrollment figures.
InvestingPro Tips suggest that while American Public Education has not been profitable in the last twelve months, there is a strong return over the last three months and a significant price uptick over the last six months, indicating a potential turnaround that investors may find encouraging. Additionally, the company's liquid assets exceeding short-term obligations and a moderate level of debt provide a degree of financial health that may reassure investors.
For those looking for more insights, there are an additional 7 InvestingPro Tips available, which can be accessed with a subscription. Interested readers can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With the next earnings date approaching on May 7, 2024, investors will be keen to see if American Public Education can indeed meet or exceed the anticipated figures and continue its upward trajectory.
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