Without looking at its chart performance, Grand Canyon Education (NASDAQ:LOPE) doesn’t natively appear to be an investment to bank on. Being an education services provider that works with Grand Canyon University, a private for-profit Christian university, the company faces two immediate challenges. First, private universities tend to be more expensive than their public counterparts. Second, Americans generally have become more liberal, leaving little room for conservative values. Yet LOPE stock has turned heads with its bullish performances.
When the dust finally settled on the tumultuous year that was 2022, Grand Canyon returned its stakeholders over 25%. In sharp contrast, the benchmark S&P 500 (SPX) index fell almost 20% during the same period.
Notably, on TipRanks, LOPE stock has a ‘Perfect 10’ Smart Score rating. This indicates strong potential for the stock to outperform the broader market.
While investors will take any win for whatever reason, the outperformance of LOPE stock carries much significance. As TipRanks reporter Marty Shtrubel pointed out, the initial impact of COVID-19 arguably didn’t devastate college-enrollment statistics. What the global health crisis did do, however, was change the allocation between in-state and out-of-state options, along with private versus public education.
Needham analyst Ryan MacDonald, citing an Eduventures Research survey, stated that enrollments are “not so much declining, but shifting towards in-state schools away from out-of-state public and private universities.”
Interestingly, sector players that should have performed well during the COVID-19 crisis – such as online course provider Coursera (NASDAQ:COUR) – surprisingly faltered. In 2022, COUR fell by almost 54%. What, then, makes LOPE stock so special?
Contrarian Values May Benefit LOPE Stock
Objectively speaking, Grand Canyon offers long-side investors much food for thought. For instance, most recently, the company posted a solid Q3-2022 earnings report. The private educator beat both consensus analysts’ targets for earnings per share and revenue. However, it could be the institution’s contrarian values that ultimately distinguish LOPE stock from the competition.
Of course, what makes Grand Canyon so surprising is that nothing socially would suggest that a Christian university would succeed. For instance, following the hard lessons learned from the COVID-19 pandemic, particularly about vast social inequalities, many companies began emphasizing environmental, social, and governance (ESG) initiatives.
To be sure, the lion’s share of Christian institutions champion efforts focused on taking care of the needy. However, certain issues run counter to their underlying faith doctrines. Moreover, resentments among religious conservatives at what they perceive as burgeoning infringements may have sparked a backlash, to which LOPE stock represents one of many beneficiaries.
For instance, an October article by The New York Times revealed that Christian school enrollment soared in a revolt against curriculum and pandemic rules. Although the piece focused on K-12 schools, the upside catalyst remains the same across the academic spectrum: a significant portion of the population wants educational programs free from liberal or non-traditional agendas.
Indeed, NYT correspondent Ruth Graham stated that parochial schools were “benefiting from a boom in conservative Christian schooling, driven nationwide by a combination of pandemic frustrations and rising parental anxieties around how schools handle education on issues including race and the rights of transgender students.”
Is LOPE Stock a Buy, According to Analysts?
Turning to Wall Street, LOPE stock has a Strong Buy consensus rating based on three Buy ratings assigned in the past three months. The average LOPE price target is $115.00, implying 7.7% upside potential.
Grand Canyon Education Also Brings an Objective Bull Case
While the above outside fundamentals intrigue, many (if not most) investors look at hard data before making a final decision. Fortunately, for anyone interested in LOPE stock, the underlying quantitative metrics deliver an objectively robust bullish narrative.
Primarily, Grand Canyon deserves extra consideration because of its stable balance sheet. With possibly many vagaries ahead of market participants in the new year, they’ll want dependable ideas. In this case, LOPE stock features an Altman Z-Score of 16.18, ranking well into the safe spectrum regarding bankruptcy risk (anything over 2.99 implies extremely low bankruptcy risk). Also, the company’s equity-to-asset ratio stands at 0.75 times, better than nearly 83% of the competition.
On the bottom line, the private university carries an operating and net margin of 27.57% and 22%, respectively. Both stats rank better than at least 83% of the academic enterprise’s rivals. Further, Grand Canyon’s return on equity is 20%, reflecting superior capabilities in converting equity financing into profits.
Finally, after exiting shares since hitting a relatively recent high in accumulation in Q4 2020, hedge funds have started to build back their positions. Per TipRanks, the investment resource labels the sentiment among these institutional investors as “positive.”
To be fair, the ultimate trajectory of LOPE stock may fluctuate depending on the strength of the economy. However, both from a narrative perspective as well as the quantitative angle, Grand Canyon is an underrepresented trade worth consideration.