ADTALEM GLOBAL EDUCATION INC (NYSE:ATGE) Presents a Compelling Value Investment Case

The search for undervalued companies is a central idea of value investing, a method established by Benjamin Graham and David Dodd nearly a century ago. This process involves finding stocks that are priced below their inherent worth, offering a possible safety buffer for investors. One technique for discovering these possibilities is using systematic filters that sort for stocks with good fundamental condition and earnings, but are available at a lower price. A "Decent Value" filter, for example, looks for companies with good valuation grades while also having acceptable results in expansion, financial condition, and earnings, trying to find good firms the market might have missed.

Valuation Measurements

A main rule of value investing is buying a dollar's worth of assets for fifty cents. ADTALEM GLOBAL EDUCATION INC (NYSE:ATGE) seems to be priced at such a lower level based on its fundamental report. The firm's valuation grade of 7 out of 10 implies it is priced well compared to its earnings and cash generation.

• Price-to-Earnings (P/E) Ratio: ATGE's P/E ratio of 13.13 is much lower than the S&P 500 average of 25.56, showing a less expensive price compared to the wider market.
• Price-to-Earnings Growth (PEG) Ratio: The firm's low PEG ratio, which includes earnings expansion, indicates a fairly inexpensive price after considering its future expansion potential.
• Industry Comparison: Judging by its Price/Forward Earnings ratio, 82% of its industry competitors are priced higher than ATGE, emphasizing its relative low price within the Diversified Consumer Services field.

This group of measurements is exactly what value investors search for—a firm trading at a sensible price without the higher cost frequently assigned to its competitors, offering that important starting point for a possible value situation.

Financial Condition

Benjamin Graham stressed the need for a good balance sheet to endure economic declines. ATGE shows good financial condition with a grade of 7, which is important for value investors as it lessens the chance of permanent loss of capital.

• Solvency: The company has a very good Altman-Z score of 3.88, showing low bankruptcy risk and doing better than 85% of its industry. Its Debt-to-Free-Cash-Flow ratio of 1.71 is also good, implying it can settle its debts fast with its cash generation.
• Debt Management: ATGE keeps a sound Debt-to-Equity ratio of 0.38, displaying a good mix between funding from debt and shareholders.
• Share Count: The amount of shares outstanding has decreased over the previous year and five years, which can be an indicator of management that considers shareholders and can raise earnings per share over time.

While the firm's current and quick ratios are under 1, which often indicates possible short-term cash concerns, the report states that this is lessened by ATGE's very good solvency and earnings, implying the ratios may not be a major issue given the details of its business operations.

Earnings Strength

For a value investment to work, the company must be fundamentally good and able to produce earnings. ATGE does very well here, having a high earnings grade of 8. A company that earns money is more probable to see its inherent worth increase over time, a main part of the value idea.

• Return Measurements: The company displays good returns on capital, with a Return on Invested Capital (ROIC) of 12.67%, doing better than 85% of the industry. Its Return on Equity of 17.34% is also notable.
• Profit Margins: ATGE's Profit Margin of 13.79% and Operating Margin of 19.55% are with the best in its industry, both doing better than 85% of rivals.
• Earnings Reliability: The company has reported positive earnings and operating cash flow in every one of the past five years, showing a dependable history.

This steady earnings provides a base of quality that value investors search for, making sure the "undervalued" situation is not an illusion created by a declining firm.

Expansion Path

While strict value investing occasionally concentrates on asset-based situations, current views also think about a company's expansion potential. ATGE has a sound expansion grade of 6, indicating it is not a static business. Future expansion is a part of inherent value, as it adds to the future cash generation a company is predicted to create.

• Past Results: The company has shown good historical expansion, with Earnings Per Share increasing 32.47% in the last year and Revenue increasing 12.24%.
• Future Predictions: Analysts anticipate this trend to persist, with EPS predicted to increase by 15.79% on average each year.

Even though the future revenue expansion rate is estimated to be more gradual than before, the overall expansion picture stays positive and supports the company's low price situation, making it an interesting option for investors looking for both value and expansion.

ADTALEM GLOBAL EDUCATION INC offers an interesting case for investors using a value method. Its good valuation, strong earnings, sound balance sheet, and acceptable expansion form a picture that matches the aim of discovering quality companies trading at a lower price. For a complete summary of all fundamental measurements, you can examine the full fundamental analysis report for ATGE.

This review of ATGE was found using a systematic method for locating value stocks. If you want to find other firms that fit similar standards of good valuation along with acceptable fundamentals, you can check the Decent Value Stocks screen on ChartMill.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The content presented is based on data believed to be reliable but is not guaranteed. All investments involve risk, and past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.