Chegg’s move to become an all-digital education company has been a huge success as it builds a high-growth, high-margin and more predictable business.
The digital business, Chegg Services, now accounts for over 80% of revenues and grew 44% in 2017 and more than doubled adjusted EBITDA. Subscribers increased 45% to a record 2.2 million, including 47% growth in Q4 alone.
The outlook for this year is for 30% revenue growth and 60% EBITDA growth reflecting the high margins and operational leverage.
The stock price has jumped 20% over the past month and doubled over the past year but the opportunities for Cheggs in education are massive. It's a trillion dollar a year industry, in which the entire industry is adjusting to the modern student, and benefiting from increasing growth in the US as well as globally.
Chegg’s is meeting the customers needs through its provision of online training aids, video, tutors and careers services.
Adjusted Q4 EPS of $0.15 beat expectations by 5 cents. On an annualized basis that would imply a PE of 33 - and with no debt and $200 million of cash that could be adjusted down by another 10%.
Perhaps stating the obvious the stock looks very attractive as long as it continues to deliver. But I agree with Dan Rosensweig, Chairman and CEO of Chegg, Inc when he said “Our results speak for themselves, as we have succeeded in delivering record engagement, record subscribers, record digital revenue, and record profitability.”
This post is not a recommendation to buy or sell any security or derivative. Stocks are not suitable for all investors. Please do your own research.
There is a good article in seeking alpha by Josh Rudnik for those who are interested.
Submitted February 17, 2018 at 03:51AM by InterestingNews1 http://ift.tt/2CrXnhw
