Should you buy, hold or sell IDP Education Ltd shares?

IDP Education (ASX: IEL) is building a global student placement platform that is the largest company for students to find a place to study internationally, benefiting from the rising wealth in Asia.

IDP Education has significant runway to reach 15% market share in its most mature markets, with its IELTS language testing business a necessity for students and a key contributor to IDP Education being the most trusted brand name in education.

The industry is under pressure as governments tighten immigration policies in response to post-COVID inflation and population growth.

These challenges have also affected IDP Education, reflected in its share price.

However, we view this as a temporary headwind. Once immigration policy settings stabilise, IDP Education is well-positioned to strengthen its competitive edge as weaker market participants are forced out.

Strategy and outlook

IDP Education is a stand-out competitor in the international education space. It is already the market leader in a fragmented market.

The company continues to win share, by leveraging its scale and leading digital assets to capture a larger share of students' attention, and offers a broader set of services to a greater range of destinations, with demonstrably higher visa acceptance rates.

In the 2024 financial year it grew student placement volumes by 17% while the industry was -13%.

As mentioned before, the industry is under pressure following the tightening of immigration standards in response to post-COVID inflation and population growth.

Importantly this industry weakness is supply-driven, underlying demand is still healthy, and responds quickly to policy setting certainty.

Industry feedback has been unanimous that this is a cyclical short-term impact, and post-election cycles and policy tightening, industry stability will re-emerge. Green shoots are already appearing in the UK post the election.

IDP Education is well placed to accelerate market share gains as students increasingly demand higher quality services and higher visa acceptance rates.

This will reduce earnings impact from current market turmoil, and accelerate earnings growth once the industry stabilises.

Returns

The IDP Education share price has materially underperformed over the recent past, falling by approximately 40% in the past 12 months.

The share price remains sensitive to ongoing regulatory developments in Australia and Canada, and escalating political tensions between India and Canada.

At its recent AGM, the company reiterated its previous guidance for a 20 to 25% decline in its key markets, an outcome that it expects to materially outperform through continued market share gains.

The 2025 financial year earnings are uncertain given so many factors are at play, however we assess the valuation on a longer timeframe taking into consideration the earnings power of the business under a more normalised operating environment, in which this financial year most certainly is not.

Recommendations

At ECP we look for companies with a strong track record of execution and earnings growth that have a sustainable competitive advantage.

The current industry challenges aren't to be dismissed and the timing of a recovery is uncertain.

However, given the strength of IDP Education's value proposition, and balance sheet, we remain constructive on the long-term opportunity in front of it. Buy.

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