Hey everyone, I posted this in the stocks sub yesterday but wanted to hear what you guys think as well as I enjoy reading both subs.
Today I was hoping to share with you all a company I recently purchased some shares of. I’d love to hear your thoughts and if you think I made a decent choice here. The company is none other than Brighter Horizons Family Solutions (BFAM) and specializes mainly in child care and daycare centers.
Some quick facts right off the bat. The company has a PE of just under 40 and pays no dividend. It has a roughly 5.75 billion dollar market cap and its listed stock price has increased roughly 30% in the past year. It experienced a 10% Growth in revenue from Q1 of the previous year while having exceeded earnings estimates several quarters in a row.
Net Income, however, decreased 9% from the Q1 of the previous year. The changes in tax law were actually a main cause behind this as despite the decrease in federal taxes paid, the company’s tax benefits weren’t as significant. The tax law changes have kind of threw off a lot of company’s financial figures so it’s tough to say just how much of an impact the new changes will ultimately have and how companies will adjust (for better or worse).
Now, why does this company draw my attention? The first is that it offers a unique sense of diversification similar to how REITs can. Childcare and daycare is unique in that for many it’s a necessity in today’s world. With baby boomers working and retiring later than their parents had, it makes it harder for younger adults to have their parents babysit their children. This leads to the question of paying for daycare or having one spouse stay at home. For many careers, taking time off can be a killer and major delay in career advancement. To add to the debate, many companies do not offer paid time or things like maternity leave making the decision even more difficult. During mighty bull market or brutal bear markets, parents need someone to look after their kids while they work.
While the almost unavoidable problem of child daycare and the growing cost of it, a company like this should benefit from raising costs in the sector. Whether parents pay directly or companies pay, the business should profit. Right now in the US, we really don’t have an answer for daycare and this isn’t a problem that is likely to go away anytime soon as it hasn’t received too much floor time on tv or political debates despite how ridiculously expensive daycare can be. I can’t really see any new law being implemented anytime soon that could change things and negatively impact a company like this.
The growing debate of importance of early education and parents willing to pay to top dollar for daycare centers offering unique and trustworthy care. This company certainly caters to upper middle class and high income parents hoping to find the best care possible for their kids. Simply put, it parents have the money they aren’t shy paying top dollar for their child’s education and care. This company tries to sell itself as offering tremendous early childhood education and social interaction.
The company has over 1,000 centers in several countries around the world. They specialize mainly in child daycare but also offer support and services in things like college coaching, workforce training/consulting, elderly care, and special needs care. I think daycare can be a big money maker but I’m curious to see how their elderly care sector will work out as it has massive potential if done correctly (which has proven difficult for many in the sector). The diversity in not only sectors but countries should prove beneficial.
The company has solid reviews from both a client and employee perspective. They were listed by Fortune magazine as a top 100 company to work for and as one of Colorado’s top workplaces to work for going into 2018 by the Denver Post. Most reviews online of the company are positive and there are no bad stories or articles when you google their name. While reviews should often taken with a gain of salt and looked at carefully, I think they still play an important part. This company doesn’t have any nightmare stories or major issues that can often plague companies involved in things like childcare or nursing homes for example.
I don’t think this company is a stock one would hold looking for a quick and easy gain. Instead it reminds me a little of a company like Visa in that it’s one of those companies that doesn’t have huge swings day to day or week to week but that you look say one year later and realize how well it’s performed. Obviously the two are totally different companies and on different scales but hopefully my comparison makes sense.
Normally I’d say wait until a dip to buy unless you absolutely love a company and have major hopes but if you look at this stock’s history there really hasn’t been too many major dips and buying opportunities. I do feel it is priced fairly reasonable in this current market environment so wouldn’t argue against buying in now. Of course past performance doesn’t equal future performance but if you’re looking for a company with pretty consistent performance this isn’t a bad pick in my view.
After looking at what both analysts and the company itself have stated, the view is that revenue should continue growing around 8-10% per year but the rate of growth should remain relatively consistent, possibly slightly lessening. For a small-mid cap company this isn’t ideal but for the type of sector this company is involved in I’d also argue its both realistic and feasible.
So what do you guys think?
Would also like to state for what it’s worth, I do own shares of this company and have a positive long term outlook for them.
Thanks!
Submitted May 19, 2018 at 10:39AM by Just-Touch-It https://ift.tt/2IA1pbQ
