Adtalem Global Education Inc. (ATGE Quick QuoteATGE - Free Report) has experienced a notable surge in its stock price over the past three months. The stock has risen 16.1%, outperforming the Zacks School industry’s decline of 4.2%. In the last six months, shares of this leading healthcare education provider have surged 54.9%, outperforming the industry’s 10.6% decline.

The company has been reaping benefits from its consistent focus on the "Growth with Purpose" strategy, strategic collaborations, and investments in marketing, technology, and student support services. The company’s "Growth with Purpose" strategy has led to a 10% increase in enrollment during the fourth quarter of fiscal 2024 by focusing on strategic and efficient expansion. This approach emphasizes operational excellence, resulting in positive financial outcomes and setting new performance benchmarks for fiscal 2025. The strategy’s success highlights the company’s commitment to maintaining high standards and achieving sustainable growth.

Over the last 30 days, the Zacks Consensus Estimate has increased 5.7% and 2.2% for the first and second quarters of fiscal 2025, respectively. These estimated figures indicate expected year-over-year growth rates of 20.4% and 13%, respectively. This indicates analysts’ optimism over the company’s prospects.  Also, ATGE offers a sound investment opportunity, as evidenced by its VGM Score of A.

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Decoding Tailwinds of ATGE

Adtalem’s "Growth with Purpose" strategy has been central to its success in fiscal 2024. The strategy focuses on expanding reach, improving operational efficiency, and enhancing student outcomes. The integration of the company’s five institutions has created synergies, leading to an efficient operating model with sustainable profitability. Investments in data-driven marketing and economies of scale have allowed the company to enhance brand awareness and drive enrollment growth while maintaining a strong EBITDA margin.

Adjusted EBITDA margin expanded 100 basis points (bps) and 10 bps year over year in the fiscal fourth quarter and full year, respectively. The company’s commitment to operational excellence is evident in its ability to expand margins despite increased investments in marketing, technology, and student support services.

Adtalem is experiencing significant growth by focusing on key areas within its business segments, particularly Chamberlain and Walden Universities. Chamberlain University is booming due to high demand for its diverse range of nursing programs and learning modalities. Meanwhile, Walden University emphasizes strong remote learning offerings, go-to-market strategy, and dedication to operational excellence.

In the fiscal fourth quarter, Adtalem’s total student enrollment rose 10% year over year to 83,321 students. Chamberlain's enrollment growth was 10.4% year over year (marking the sixth consecutive quarter of growth), and Walden University's enrollment growth was 11.3% year over year in the quarter.

Chamberlain University — which accounted for 40% of fiscal 2024 revenues — benefits from the expansion of its online Bachelor of Science in Nursing program to 34 states, increasing accessibility for students. Strategic campus openings in Phoenix and Kansas City enhance its national presence.

With its vast campus and flexible online and hybrid learning options, Chamberlain is positioned as a pioneer in providing education to students that suits their learning styles. The continuous expansion will lead to success in the long run. Investments in modern facilities and specialized programs like “Practice Ready. Specialty Focused.” further strengthen its leadership in nursing education.

Walden University — which accounted for 37.6% of fiscal 2024 revenues — benefits from strong enrollment growth driven by its focus on flexible, tech-enhanced learning for working adults. Significant investments in technology, such as a redesigned website and student support platforms, improve students' experience and persistence rates. The university's leadership in nursing and social and behavioral health programs, along with the success of its competency-based Tempo program, also contribute to its robust performance and growth trajectory.

Meanwhile, the Medical and Veterinary segment, which accounted for 22.4% of fiscal 2024 revenues, benefits from operational improvements and strategic initiatives, such as Ross Med's Clinical Return Home program, which enhances student outcomes. Despite enrollment challenges, Ross Vet operates near capacity, driving revenue growth.

Adtalem’s balance sheet is strong, with $219.3 million in cash and a low adjusted EBITDA net leverage of 1.2x as of June 30, 2024. The company generated $239.5 million in free cash flow in fiscal 2024, up $70.8 million year over year, driven by operational improvements and effective working capital management. This robust cash flow allows for continued investments in growth initiatives while maintaining financial flexibility and returning capital to shareholders through share repurchases.

The company consistently aligns its initiatives with a forward-looking vision, staying firm in its focus on long-term sustainability and growth. ATGE projects revenue growth of 5% to 7.5% for fiscal 2025, with expected revenues between $1,660 million and $1,700 million. Adjusted earnings per share are expected to be in the range of $5.60-$5.85, indicating a rise of roughly 12% to 17% from the previous year.

What May Impact ATGE’s Stock

A few things could potentially strain the stock's performance, and rising operating costs are one of the major concerns. In the fiscal fourth quarter and full year, the cost of educational services increased 11.5% and 7.7% year over year, respectively. Similarly, student services and administrative expenses increased 0.8% for the fourth quarter and 8.8% at the end of 2024 from the year-ago periods. The surge in spending was due to a rise in incentive compensation expenses, marketing expenses, and investments to support growth initiatives.

During fiscal 2024, Adtalem faced challenges, including declining enrollment in the Medical and Veterinary segment (down 2.9% in the fiscal fourth quarter), increased employee benefit costs, and higher bad debt provisions. The need for substantial investments in marketing, student support, and technology to drive growth pressured margins. Additionally, maintaining competitive pricing in a dynamic market was challenging, requiring careful adjustments to optimize pricing without losing market share.

ATGE’s Zacks Rank and Key Picks

Some better-ranked stocks have been discussed below:

Adtalem currently carries Zacks Rank #3 (Hold).

Grand Canyon Education, Inc. (LOPE Quick QuoteLOPE - Free Report) currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LOPE has a trailing four-quarter earnings surprise of 10.2%, on average. The Zacks Consensus Estimate for LOPE’s current financial-year sales and EPS implies growth of 7.2% and 13.3%, respectively, from the year-ago levels.

Lincoln Educational Services Corporation (LINC Quick QuoteLINC - Free Report) presently carries a Zacks Rank of 2. LINC has a trailing four-quarter earnings surprise of 249.4%, on average. The Zacks Consensus Estimate for LINC’s current financial-year sales and EPS implies growth of 13.4% and 4.0%, respectively, from the year-ago levels.

Stride, Inc. (LRN Quick QuoteLRN - Free Report) currently holds a Zacks Rank of 2. LRN has a trailing four-quarter earnings surprise of 40.3%, on average. The Zacks Consensus Estimate for LRN’s current financial-year sales and EPS implies growth of 6.3% and 7.7%, respectively, from the year-ago levels.