Critical Review: K12 (LRN) and Nord Anglia Education (NYSE:NORD)

Nord Anglia Education (NYSE: NORD) and K12 (NYSE:LRN) are both consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, dividends, analyst recommendations and profitabiliy.

Insider and Institutional Ownership

34.8% of Nord Anglia Education shares are owned by institutional investors. Comparatively, 79.2% of K12 shares are owned by institutional investors. 2.7% of Nord Anglia Education shares are owned by company insiders. Comparatively, 18.3% of K12 shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares Nord Anglia Education and K12’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nord Anglia Education 6.71% 22.11% 3.06%
K12 0.05% 3.20% 2.39%

Earnings and Valuation

This table compares Nord Anglia Education and K12’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Nord Anglia Education $907.80 million 3.76 $173.60 million $0.57 57.49
K12 $894.08 million 0.76 $42.05 million N/A N/A

Nord Anglia Education has higher revenue and earnings than K12.

Volatility and Risk

Nord Anglia Education has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500. Comparatively, K12 has a beta of -0.2, meaning that its share price is 120% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for Nord Anglia Education and K12, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nord Anglia Education 1 5 2 0 2.13
K12 0 0 3 0 3.00

Nord Anglia Education currently has a consensus target price of $30.50, suggesting a potential downside of 6.93%. K12 has a consensus target price of $17.00, suggesting a potential upside of 1.07%. Given K12’s stronger consensus rating and higher possible upside, analysts plainly believe K12 is more favorable than Nord Anglia Education.

Summary

Nord Anglia Education beats K12 on 8 of the 13 factors compared between the two stocks.

About Nord Anglia Education

Nord Anglia Education, Inc. is an operator of international schools. As of August 31, 2016, the Company taught over 37,000 students, from kindergarten through the end of secondary school (K-12), at its 43 schools in China, Europe, the Middle East, South East Asia and North America. The Company’s segments include China, Europe, Middle East (ME), Southeast Asia (SEA), North America and Other. The China segment includes its activities in the People’s Republic of China and the Hong Kong Special Administrative Region. The Europe segment includes the Company’s activities in Switzerland, Slovakia, Hungary, the Czech Republic, Spain and Poland. The ME segment includes the Company’s activities in the United Arab Emirates and Qatar. The SEA segment includes the Company’s activities in Thailand, Singapore, Cambodia and Vietnam. The North America segment includes the Company’s activities in the United States and Mexico. The Other segment includes the Learning Services division.

About K12

K12 Inc. (K12) is a technology-based education company. The Company offers curriculum, software systems and educational services designed to facilitate individualized learning for students in kindergarten through 12th grade (K-12). It provides a continuum of technology-based educational products and solutions to public school districts, public schools, virtual charter schools, private schools and families. The Company offers a set of products and services primarily to three lines of business, which include Managed Public School Programs, which consists of virtual and blended schools; Institutional business, which includes educational products and services sold to school districts, public schools and other educational institutions, and Private Pay Schools and Other, which includes private schools, including international, for which it charges student tuition and direct consumer sales. It sells individual online courses and supplemental educational products directly to families.

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