Why the future could look very different for 3P Learning
Key statistics: 3P Learning
20/10/15 closing share price: $2.290
52 week high: $2.850
Most recent dividend: 1.800c
Annual dividend yield: 0.79%
If you have children of school age, you're probably familiar with the products developed and marketed by 3P Learning: Mathletics, Spellodrome, Reading Eggs and their latest product, IntoScience.
3P's products are used by over 5.3 million students in over 17,000 schools on every continent around the world - 110 counties in total. Very few Aussie companies can boast such a wide reach around the globe.
While the 3P Learning share price hasn't done much since listing on the ASX in July 2014, if the company continues its recent track record of rising earnings, profits and cash flows, then the future could look very different.
2015 profits were around 30% higher than the previous year. Whilst return on equity, the best measure of a company's economic performance, dipped in 2015 due to the cost of listing the company, at 20% it's not too shabby.
Just 110, or 6%, of the 1800-odd stocks listed on the ASX are expected to generate this return over the coming 12 months. This puts 3PL in the same league as market darlings CSL, Domino's Pizza and TPG Telecom.
Future growth will be driven by 3PL's global reach, and also its continual focus on innovation. In 2015 3PL invested $3.725 million in product development, and this is expected to continue in order for the company to remain competitive.
As a business reliant on recurring income, there was a risk to the company's recurring revenue when it raised its prices in 2015. In their 2015 results announcement management noted "our retention rates to date have not been significantly impacted as a result of the changes in pricing".
It is a rare quality indeed that a company is able to raise prices without impacting revenue. The successful transition supports the relevancy of 3PLs products to successful learning outcomes and why teachers love them!
Today 3P Learning shares are trading at $2.25. Skaffold forecasts the underlying value of 3PL could grow at around 17%pa over the next two years, from $1.95 to $2.67. Buying the shares around $2.00 represents good value.