EDUC
After selling shares in the upper 9's I bought back today in the 6's.
First of all let me answer some of the short article. And one of them quite frankly he is right on or somewhat right on. Has there been execution issues. Even the CEO would not deny that.
The bleeding associates comments I don't agree with, as I feel it is statistically inaccurate at least based on the public info we have so far. it was 17.2k at the end of q3 2015, it was roughly 28k after q3 today, and was 26k after q2, so can't see how associates are dropping, when you list something like that your thesis does go up a little (in blank) in my opinion, I mean we can all confirm where associates were they list that date every quarter and until proven otherwise that trend is up and bleeding associates sounds like the number is in freefall, could they see a short-term hiccup with the christmas debacle thing, sure on that front. Do I think growth will be as rapid going foward the answer is no, and I said so numerous times before. Are there risks here. the answer is yes. Can they get pre tax margins back to historical norms if they can even with moderating growth, keep in mind moderating growth for them may be 20-30% rev growth at this point they could easily post $1.50-2.00 in this upcoming fy. Which Means the stock could trade triple current prices.
as for the liquidity issue it was and issue that was solved by them shipping the product as deferred revs rose dramatically because of the shipping debacle, it was a temporary issue. they further helped matters by stopping the divy. They also paid back the ceo, the cash flow I don't believe will be a big issue unless admittingly they have more execution issues that lead to huge deferred revs in my opinion, which causes a short-term problem.
Why I like EDUC?
1) The company is still a fast grower, forget december for a second because that was a filling month, but jan and feb average 35% revenue growth y/y based on my calculations, I know 126 million missed 130 million guidance, and was the company too optimistic. sure? But I was worried about that near $10 not in the 6's.
2) If revs grow 25% this year, which would be 10% less then jan and feb run rate, revs would be in the 130 million range, if pre tax margins can operate in the 8-10% range like historical norms, they could easily earn a $1.50 and perhaps as much as $2.00, and I'm factoring in growth slowing as well. This is a bet to me can they get operating margins up. if they can they won't do that in q4 by the way with the shipping fiasco, but I'm starting we will see the light in q1 on the operating margins front. I believe I'm right. I expect EDUC to report .15-.20 in q4 which will look good against a lousy comp, and in the 6's with a good outlook I think the place it can go is higher.
Of course there always runs the risk that the company fails to meet expectation, and I'm not saying this is a perfect story, as it does have some risk if things go awry, but it also has grand slam potential 2018 fy goes well we could be seeing the stock double or even triple from current prices in my opinion. So I bought a little EDUC in the 6's will add more on weakness. I like the stock and believe in the CEO who admittingly is a bit of a character, but I get the feel he all in at least. Time will tell if educ in the 6's is a good investment decision lately I have been picking a ton of losers so who knows, but for the most part I don't agree with the short position, outside of the execution which we know about, this is no ground breaking news. All is just my opinion, and I could always be wrong though.
