Contrasting Strayer Education (STRA) and China Distance Education Holdings Limited (DL)

Strayer Education (NASDAQ: STRA) and China Distance Education Holdings Limited (NYSE:DL) are both small-cap consumer discretionary companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, valuation, institutional ownership, risk, profitabiliy, earnings and analyst recommendations.

Analyst Ratings

This is a breakdown of recent recommendations for Strayer Education and China Distance Education Holdings Limited, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Strayer Education 0 2 1 0 2.33
China Distance Education Holdings Limited 1 0 1 0 2.00

Strayer Education presently has a consensus target price of $82.67, indicating a potential downside of 10.75%. China Distance Education Holdings Limited has a consensus target price of $14.00, indicating a potential upside of 43.15%. Given China Distance Education Holdings Limited’s higher possible upside, analysts clearly believe China Distance Education Holdings Limited is more favorable than Strayer Education.

Dividends

Strayer Education pays an annual dividend of $1.00 per share and has a dividend yield of 1.1%. China Distance Education Holdings Limited pays an annual dividend of $0.45 per share and has a dividend yield of 4.6%. Strayer Education pays out 33.2% of its earnings in the form of a dividend. China Distance Education Holdings Limited pays out 57.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. China Distance Education Holdings Limited has increased its dividend for 2 consecutive years. China Distance Education Holdings Limited is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Strayer Education and China Distance Education Holdings Limited’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Strayer Education $444.83 million 2.22 $76.79 million $3.01 30.77
China Distance Education Holdings Limited $122.87 million 2.62 $30.69 million $0.78 12.54

Strayer Education has higher revenue and earnings than China Distance Education Holdings Limited. China Distance Education Holdings Limited is trading at a lower price-to-earnings ratio than Strayer Education, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Strayer Education has a beta of 1.04, suggesting that its stock price is 4% more volatile than the S&P 500. Comparatively, China Distance Education Holdings Limited has a beta of 1.52, suggesting that its stock price is 52% more volatile than the S&P 500.

Insider & Institutional Ownership

92.4% of Strayer Education shares are owned by institutional investors. Comparatively, 19.6% of China Distance Education Holdings Limited shares are owned by institutional investors. 6.7% of Strayer Education shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Strayer Education and China Distance Education Holdings Limited’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Strayer Education 7.41% 17.27% 10.68%
China Distance Education Holdings Limited 20.98% 49.30% 15.47%

About Strayer Education

Strayer Education, Inc. is an education services holding company. The Company provides post-secondary education and other academic programs, through its subsidiaries, Strayer University (the University) and New York Code and Design Academy (NYCDA). As of December 31, 2016, the University offered undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, nursing, public administration and criminal justice at 74 physical campuses located in the Mid-Atlantic and Southern regions of the United States, and online. The University also offers an executive Master of Business Administration (MBA) online through its Jack Welch Management Institute. Its subsidiary, NYCDA, provides non-degree courses in Web and application software development, primarily at its campus in New York City. Each undergraduate degree program includes courses in oral and written communication skills, as well as mathematics.

About China Distance Education Holdings Limited

China Distance Education Holdings Limited is a holding company. The Company is engaged in providing online and offline education services, and selling related products in the People’s Republic of China (PRC). The Company’s segments include online education services, business start-up training services and the sale of learning simulation software. The Company primarily sells books and reference materials related to its courses, such as the various levels of Accounting Professional Qualification Examinations, accounting continuing education, the National Practicing Medical Doctor Qualification Examination, the National Pharmacist Qualification Examination, and Associate Constructor and Constructor Qualification Examinations. It offers college oriented online-to-offline products and services, business start-up training courses and others. The Company had a content library with 263 course offerings of audio-video content, as of September 30, 2016.

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