Zovio Inc.: The Future Of Education Technology (NASDAQ:ZVO)
Education is what survives when what has been learned has been forgotten. – B. F. Skinner
Zovio Inc. (NASDAQ:ZVO) is an education technology company that works directly with schools and corporations to create personalized learning solutions. Zovio specializes in developing platforms that leverage data analytics to streamline curated content delivery to students.
Zovio was started in San Diego in 2014 under its original name, Bridgepoint Education. The company has a market cap of roughly $132M, considerably smaller than some of its competitors in the education technology space, like Strategic Education Inc. (NASDAQ:STRA) ($2.3B) or Grand Canyon Education Inc. ($814M) (NASDAQ:LOPE).
Unlike its peers, Zovio has enjoyed a near doubling of its stock price so far this year. From just over $2 per share at the beginning of 2020, ZVO is now trading above $4. The appreciation in price, however, came after a dismal 2019 performance for the stock.
ZVO has performed far better in 2020 versus the overall market and comparable names in the Education and Training Services Industry. – Source: YCharts
With continued disruptions to education brought on by the pandemic, remote learning has taken center stage in recent months. As discussed in The Lead-Lag Report’s most recent Global View, while COVID-19 restrictions have softened in some areas, they are simultaneously reemerging in others, indicating further protracted isolation measures. In this environment, Zovio is well equipped to serve any increasing appetite for remote education.
At the fundamental level, ZVO exhibits some troubling signs. Revenue and earnings in recent years have failed to beat previous year results, leading to a worrying downward trend.
2020 saw a continuation of lowering revenue.
On the other hand, certain fundamental metrics offer reasons for optimism. ZVO enjoyed a current ratio of 1.364 for the period ending June 30, 2020. Any value above one indicates the company has been able to cover its current liabilities using its current assets. Zovio also enjoys a modest debt to equity ratio of only 0.025 and has generated over $47M in annual cash flow every year, on average, for the past decade.
Zovio prides itself on providing curated, personalized education for students. Given the trajectory of education, demand for more remote, customized learning will likely only increase. Fullstack Academy (coding bootcamps) and TutorMe (comprehensive online service matching students with tutors) are two Zovio brands in particular that I expect will grow in popularity, given the current environment.
Impacts from the pandemic are also affecting the way employees of companies complete continuing education. COVID-19 disruptions will only serve to further push companies to utilize remote learning for their staff, of which Zovio is a facilitator. Educational institutions, too, increasingly threatened with lower physical enrollment, will look to companies like Zovio to help them pivot and continue to maintain and grow their student population.
Remote learning is still very much in its infancy, but COVID-19 challenges are rapidly prompting progress in this industry. Although ZVO exhibits some worrying signs at the fundamental level, it operates in this rapidly growing space and enjoys an existing network and established brand. Given this reality, further appreciation in Zovio’s share price in the coming months may not be surprising.
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Gloss