Morningstar adds IDP Education to global ‘best ideas’ list
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The news: Analysts at Morningstar have added IDP Education to their 'Global Equity Best Ideas' list citing improving market share and positive pricing outlook for the education services provider.
The numbers: IDP reported double-digit growth in its student placement business at the time of its full-year results in August. But last month said it expects a 20% to 25% decline in student volumes over the next year amid government policy changes, prompting a share slide.
Morningstar holds a fair value estimate of $18.30 per share on the company. Its shares are down 0.4% to $13.89 in early trading on the ASX.
The context: The analysts said despite the short-term uncertainty, IDP is likely to benefit from the long-term macroeconomic drivers that underpin the international education industry.
The analysts see compelling long term value given foreign student caps are temporary and in response to temporary cyclical concerns. The pricing outlook also remains positive with IDP negotiating improved terms and universities looking to raise tuition fees in light of the undersupply, they added.
What they said: "We think the market has a short-sighted view of IDP Education, driven by recent declining volumes and regulatory uncertainty. We agree that the short-term outlook is soft and and forecast IDP’s earnings to go backwards in fiscal 2025," Morningstar said in a note.
"But we expect the firm to continue taking market share as the industry preferences quality operators."
The source: Morningstar research
