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Adtalem (ATGE) Up 13% in 6 Months: More Room for Growth?

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Adtalem Global Education Inc. ATGE has been riding high on the back of cost-saving initiatives, transformation strategy and solid enrollment growth at Chamberlain. Also, increased focus on OnCourse learning bodes well.

Shares of Adtalem have gained nearly 13% over the past six months against the industry’s 3% decline. Further, upward revision of earnings estimates for fiscal 2021 indicates analysts’ confidence in the company’s growth potential. Over the past seven days, the Zacks Consensus Estimate for earnings for the current year ending June 2021 has risen 1% to $2.92 per share. This positive trend signifies bullish analysts’ sentiments and justifies its Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term.


Major Growth Drivers

Collaboration and Innovation Drive Growth: Adtalem has laid out plans to ensure a balanced focus on investment initiatives to deliver direct returns to shareholders. It remains focused on collaborations with hospitals, government agencies and professional organizations to design education programs aimed at teaching new skills to employees. Furthermore, a number of short-term programs will be introduced, which are more directly aimed at meeting students’ preference and employers’ needs. It keeps on collaborating with different institutions to boost student enrollment.

During first-quarter fiscal 2021, Association of Certified Anti-Money Laundering Specialists (“ACAMS”), in partnership with ElephantThink, started a web-based compliance training program for Dutch banking group. Focus on customer relations and due diligence training will help other employer partners.

Also, ACAMS has been awarded contracts by the U.S. embassy in Panama, and European Bank of Reconstruction and Development to provide training with respect to anti-money laundering. Additionally, the launch of some products designed for preventing criminal abuse in any country’s financial system is in the pipeline.

Adtalem has started developing its hybrid BSN degree via utilizing online instruction and in-person intensive learning. Adtalem is directly enacting with different stakeholders that include the administration in Congress to implement regulatory initiatives for strengthening the industry and addressing issues of access, affordability, quality, as well as innovation.

Focus on OnCourse Learning: Amid the pandemic, Adtalem — similar to other for-profit education companies like Stride, Inc. LRN — increased its focus on virtual technology capabilities. It has also adjusted offerings for its students, customers and employer partners to reduce the negative impact of the global crisis. In the financial service segment, OnCourse learning has been a major catalyst to growth. In a bid to extend its business B2C and B2B, it is consistently investing and developing training products for the banking and credit union sector. Revenues in the Financial Services segment for the fiscal first quarter totaled $49.4 million, up 4.9% year over year, given higher revenues at OnCourse Learning.

Cost-Saving Initiatives: To resolve increased cost-related issues, the company has taken a number of cost-reduction initiatives like workforce reduction and curbing discretionary spending. It is largely focusing on severe cost-control routines, with special emphasis on controlling and escalating costs at some of its institutions.

Adtalem is optimistic about its portfolio and cost-management approach, as well as anticipates long-lasting revenues and EPS growth.

Healthcare Institutions Driving Growth: Since financial year 2013, Adtalem’s health care and international institutions have grown impressively. In the health care institution Chamberlain, new and total student enrollment was robust in first-quarter fiscal 2021, improving 13.2% and 11.9% in the September session, and 15.5% and 12.2% in the July session, respectively, over the year.

Moreover, with change in the global scenario, the demand for nurses and frontline workers is ever increasing. Adtalem is planning to capitalize on the demand-supply imbalance in nursing and the wider healthcare industry supported by financing new programs in markets in which the demand is optimum. It is positive about the demand trends in the medical and healthcare segment from both students, as well as employees.

During the first quarter of fiscal 2021, Chamberlain revenues increased 14.8% (or $17.2 million) year over year to $133.8 million. This surge was majorly due to a rise in total student enrollment in each session of fiscal 2021, in addition to a hike in non-tuition fee price.

Other Key Picks

Other top-ranked stocks include Afya Limited AFYA and RISE Education Cayman Ltd REDU. Afya and RISE Education carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Afya and RISE Education Cayman’s earnings for 2021 are expected to increase 40.9%, 272.7%, respectively.

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