Adtalem Global Education - Fundamental Investment Case (Trade closed on 25 October 2019)

Adtalem Global Education is a global provider of education services through three main segments: Medical and Healthcare; Technology and Business; and Professional Education. Medical and Healthcare contains veterinary and medical schools located in the Caribbean, along with US nursing schools Chamberlain. Technology and Business is its Brazilian business. Professional Education is largely the Association of Certified Anti-Money Laundering Specialists and Becker test prep. Geographically, revenue is broken down between the US at nearly 50%, Brazil in the low-20%'s, and the balance from the Caribbean. Its traditional postsecondary schools (i.e. DeVry and Carrington) are no longer an active part of the portfolio, either being sold or awaiting final sale closure.

Qualitative Concerns:

• Medical school competition in the form of traditional stateside along with osteopathic schools expanding supply
• Nursing schools (Chamberlain) have seen slowing growth and flat tuition for several years
• Brazil has headwinds from governmental program reductions and increased competition
• Becker facing challenges from CPA test changes
• Estimates look optimistic in the projection of accelerating growth from top to bottom
• May be some regulatory risk to placing residents in US hospitals due to state government regulatory bodies. Also concerns with procuring necessary visas.
• Vet applicant trends cyclically peak every 20 years; if the pattern holds, the next top will be this year 

Fundamental Concerns:

• Easy comparisons are ending with respect to margins and sales/enrollment
• Deferred revenue has trailed revenue and accounts receivables in recent quarters
• ROIC has been on a long-term downtrend and trails WACC
• Trades above average multiples historically