While the broader market has struggled with the S&P 500 down 2.5% since November 2024, Laureate Education has surged ahead as its stock price has climbed by 18.2% to $22.46 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Laureate Education, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Laureate Education Not Exciting?
We’re happy investors have made money, but we're cautious about Laureate Education. Here are three reasons why there are better opportunities than LAUR and a stock we'd rather own.
1. Weak Growth in Enrolled Students Points to Soft Demand
Revenue growth can be broken down into changes in price and volume (for companies like Laureate Education, our preferred volume metric is enrolled students). While both are important, the latter is the most critical to analyze because prices have a ceiling.
Laureate Education’s enrolled students came in at 477,000 in the latest quarter, and over the last two years, averaged 5.7% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. EPS Growth Has Stalled
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Laureate Education’s flat EPS over the last five years was weak. On the bright side, this performance was better than its 3.4% annualized revenue declines.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Laureate Education historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.6%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.
Final Judgment
Laureate Education isn’t a terrible business, but it isn’t one of our picks. With its shares beating the market recently, the stock trades at 14.9× forward P/E (or $22.46 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now. We’d suggest looking at the Amazon and PayPal of Latin America.
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