Lincoln Education Services Corp. (LINC) provides vocational education for high school graduates and working adults in the United States. Currently, the company has 22 campuses with about 14,000 enrolled students.
The company’s education for blue-collar professions is quite crucial for the economy given that the average age for these professions is in the low to mid-50s, while there has been a retirement wave during the pandemic. This demographic tailwind should result in high demand over the next decade.
The pandemic also led to another change that could materially increase LINC’s revenues due to increasing the company’s capacity. In addition to these factors, LINC has above-average growth and value characteristics.
Read on to find out why LINC is one of my top picks for 2022…
For-Profit Industry Background
The for-profit education industry was crushed over the last decade due to a government crackdown on its recruiting and business practices. Many of these companies were engaged in unscrupulous and fraudulent behavior that resulted in heavy fines, penalties, and regulation. The result was that these stocks were crushed, and many investors have lost interest in the sector.
While LINC is a for-profit education stock, it was not engaged in these practices. The company has a 70% graduation rate and an 80% job placement rate which is better than most colleges. This is a stark difference from the fraudulent, for-profit schools which had a lackluster graduation rate and pitiful job placement rates.
Valuation
LINC has been handicapped due to the headwinds faced by the sector. However, this “misconception” is creating an opportunity for investors to buy the stock at a discount as it has a forward P/E of 11 which is nearly half of the S&P 500.
Further, the stock is already in the midst of an earnings boom with EPS more than doubling over the past year. And, there are reasons to expect this to persist given some changes in the economy during the pandemic.
Post-Pandemic Opportunities
The coronavirus has resulted in several, positive catalysts for LINC. One is that the company owns large amounts of real estate in many cities, where real estate prices have risen rapidly. It’s monetized this appreciation through sales and leasebacks which have added $80 million to the company’s coffers this year. In total, LINC has about 25% of its market cap in cash.
With the pandemic, LINC schools moved to offer classes remotely and are now offering most classes through a hybrid system of online and in-person classes. The net result is that with hybrid classes, LINC’s capacity has increased in terms of the number of students it can enroll at one time.
The coronavirus also resulted in massive changes in terms of the labor force especially with many older workers choosing to retire. Already, there was a shortage of blue-collar workers in the skilled trades, and it’s only likely to get worse with the infrastructure bill being passed.
This means that the services offered by LINC are even more important as they are one of the companies offering training so that people can pursue careers in these fields. Many companies are also dealing with this shortage and are looking to partner with companies like LINC.
POWR Ratings
The POWR Ratings are also consistent with this constructive outlook as LINC is rated an A which equates to a Strong Buy. A-rated stocks have posted an average annual performance of 30.7% which compares favorably to the S&P 500’s annual performance of 7.1%.
The stock is a POWR Ratings superstar with A and B scores in multiple component categories including Value, Growth, Sentiment, Stability, and Quality. Click here to see LINC’s POWR Ratings in complete detail.
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LINC shares were trading at $7.77 per share on Wednesday morning, down $0.05 (-0.64%). Year-to-date, LINC has gained 19.54%, versus a 24.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.
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