Why Perdoceo Education Corporation (NASDAQ:PRDO) Could Be Worth Watching

Perdoceo Education Corporation (NASDAQ:PRDO), might not be a large cap stock, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Perdoceo Education’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Perdoceo Education

Is Perdoceo Education Still Cheap?

Good news, investors! Perdoceo Education is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Perdoceo Education’s ratio of 9.05x is below its peer average of 21.74x, which indicates the stock is trading at a lower price compared to the Consumer Services industry. What’s more interesting is that, Perdoceo Education’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Perdoceo Education?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -15% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Perdoceo Education. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although PRDO is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to PRDO, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on PRDO for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Perdoceo Education as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Perdoceo Education you should know about.

If you are no longer interested in Perdoceo Education, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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