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Adtalem (ATGE) Up More Than 57% in 6 Months: What's Driving It?

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Adtalem Global Education Inc.’s ATGE shares have gained 57.1% over the past year against the Zacks Schools industry’s 27.6% decline and the broader Consumer Discretionary sector’s rally of 26.4%. The performance was mainly driven by successful execution of strategic initiatives to boost enrollment. Adtalem has multiple courses to drive revenues that comprise tapping the strong demand for Medical and Healthcare professionals, capitalizing on solid demand to the mortgage market and OnCourse Learning.

Also, continuous innovation in its product offerings, driving growth in Becker and providing a broad range of options for Association of Certified Anti-Money Laundering Specialists or ACAMS offerings bode well.

Furthermore, the stock still has upside potential as is evident from the recent earnings estimate revision trend. Earnings estimates for fiscal 2021 have moved up 2.1% over the past 60 days. This trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Major Growth Drivers

Solid Performance by Healthcare Institutions: Adtalem’s health care and international institutions have shown significant improvement in revenues and profitability since fiscal 2013.

In particular, health care institution Chamberlain’s new and total student enrollment was solid in the fiscal second quarter of 2021, improving 8.1% and 10.2% in the December session, and 13.2% and 11.9% in the September session, respectively, from a year ago. This university is well positioned to gain from growing demand for nurses and other healthcare professionals, and the increasing roles they play in the healthcare industry. The company has plans of capitalizing on this supply-demand imbalance in nursing and the broader healthcare industry by investing in new programs in markets where it sees the maximum demand. The company is optimistic about the demand trend in the medical and healthcare segment from both students and employees. During the second quarter of fiscal 2021, Chamberlain revenues increased 13.2% (or $16.5 million) to $142 million. The increase can be primarily attributed to a rise in total student enrollment during each fiscal year 2021 enrollment session along with a hike in non-tuition fee price.

Focus on OnCourse Learning: In the financial service segment, OnCourse learning has been a major growth driver. During the second quarter of fiscal 2021, segment revenues increased 5.9% to $48.7 million year over year on increased OnCourse Learning and Becker revenues. OnCourse experienced strong revenue growth in its mortgage loan officer training and continuing education business, attributable to increased demand in the current strong mortgage market. Meanwhile, at Becker, revenues increased on growth in both CPA and continuing education program offerings.

Collaboration and Innovation: Adtalem, which shares space with Grand Canyon Education, Inc. LOPE, Strategic Education, Inc. STRA and American Public Education, Inc. APEI in the same industry, has been paying more emphasis on partnering with corporations, hospitals, government agencies and professional organizations to design education programs aimed at teaching new skills to employees. Also, increased 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. Notably, during the fiscal first quarter, ACAMS, in partnership with ElephantThink, rolled out a web-based compliance training program for Dutch banking group. Meanwhile, ACAMS has been awarded contracts by the U.S. embassy in Panama and the European Bank of Reconstruction and Development to deliver training with respect to anti-money laundering.

Higher ROE: Adtalem’s return on equity (ROE) is indicative of growth potential. The company’s ROE of 11.8% compares favorably with the industry average of 5.6%, implying that it is efficient in using shareholders’ funds.

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