The IDP Education Ltd (ASX: IEL) share price was one of the best performers on the S&P/ASX 200 Index (ASX: XJO) in August.
The student placement and language testing company’s shares recorded a stunning 50% gain over the month.
Why did IDP Education rocket higher in August?
Investors were fighting to buy IDP Education shares in August after the release of a surprisingly strong full year result.
Although the company was hit hard by the pandemic, it was still able to deliver strong profit growth.
For the 12 months ended 30 June 2020, IDP Education reported a 2% decline in revenue to $587.1 million but an impressive 29% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $148.6 million.
This profit growth was driven by a material reduction in both direct and overhead costs. Management revealed that direct costs fell 8% to $241.9 million and overhead costs were reduced by 10% to $196.2 million.
The company’s CEO, Andrew Barkla, commented: “Our results reflect strong momentum in the first of the half year, followed by a pivot towards disciplined capital management and product innovation in the second half.”
What were the drivers of its results?
Thanks to a strong performance from the multi-destination side of the company’s Student Placement business, this key business reported a 12% increase in revenue to $190.6 million.
This was supported by its English Language Teaching and Digital Marketing & Events businesses. They both grew revenue by 4% year on year.
However, the company’s biggest segment was out of form and offset these gains. IDP Education’s English Language Testing business reported a 9% decline in revenue to $325.5 million in FY 2020.
Is it too late to invest?
While it isn’t the bargain buy that it was a few months ago, I still believe IDP Education would be a great long term option for investors.
Especially given its strong balance sheet, growing footprint, strong online offering, and favourable tailwinds.
Another positive is that management notes that student intentions are strong. Its research is showing that only 7% of students no longer intend to commence study as planned. This could mean demand for its services grows strongly once trading conditions return to normal.
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More reading
- These were the best performing ASX 200 shares in August
- How to become rich by investing $1,000 into ASX shares
- These ASX shares were top performers last week
- ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
- These were the best performing ASX 200 shares last week
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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