U.S. Markets closed

What Should Investors Know About Career Education Corporation's (NASDAQ:CECO) Future?

Simply Wall St

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Career Education Corporation's (NASDAQ:CECO) latest earnings update in December 2018 revealed that the business finally turned profitable after delivering negative earnings on average over the last couple of years. Today I want to provide a brief commentary on how market analysts predict Career Education's earnings growth outlook over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Career Education

Analysts' outlook for the coming year seems optimistic, with earnings increasing by a robust 46%. This growth seems to continue into the following year with rates arriving at double digit 63% compared to today’s earnings, and finally hitting US$99m by 2022.

NasdaqGS:CECO Past and Future Earnings, May 9th 2019

Although it is helpful to understand the rate of growth each year relative to today’s figure, it may be more beneficial to estimate the rate at which the company is rising or falling on average every year. The benefit of this technique is that we can get a bigger picture of the direction of Career Education's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I've inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 19%. This means, we can assume Career Education will grow its earnings by 19% every year for the next couple of years.

Next Steps:

For Career Education, there are three pertinent aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is CECO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CECO is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CECO? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.