Chegg (CHGG) vs. Afya Limited (AFYA): Which EdTech Stock Will School the Competition?

The EdTech market encompasses technological solutions designed to enhance educational processes, including online learning platforms and virtual classrooms. The rise in demand for online learning is driven by changes in education and the digital transformation of traditional teaching, highlighting the need for flexible, accessible education for various learning styles.

According to Cognitive Market Research, the global EdTech market is expected to expand at a CAGR of 14% by 2031.

Additionally, the digitization of education has increased the use of advanced technologies like smartphones in learning. GSMA Intelligence reports that almost 300 million people have recently accessed the internet for the first time, growing the market’s potential. Tablets are anticipated to be the primary educational devices due to their compatibility with various software tools.

Against this backdrop, let’s compare two EdTech stocks, Chegg, Inc. (CHGG) and Afya Limited (AFYA), to analyze which EdTech stock will school the competition.

The Case for Chegg, Inc. stock

Valued at $236.37 million by market cap, Chegg, Inc. (CHGG) operates a direct-to-student learning platform that helps learners build essential life and job skills to accelerate their path from learning programs internationally. Its subscription services include Chegg Study, Tinger Gold, DashPash Student services, Chegg Writing, Chegg Math, Chegg Study Pack, and Busuu.

CHGG’s stock has declined 78.3% over the past year to close the last trading session at $2.28.

In terms of the trailing-12-month gross profit margin, CHGG’s 73.21% is 99.7% higher than the 36.66% industry average. Likewise, its 12.71% trailing-12-month EBITDA margin is 12% higher than the industry average of 11.35%. However, its 0.44x trailing-12-month asset turnover ratio is 55.1% lower than the industry average of 0.99x.

CHGG’s revenues for the second quarter that ended June 30, 2024, were reported at $163.15 million. However, its adjusted EBITDA declined 8.1% from the year-ago value to $44.10 million. The company’s non-GAAP net income and non-GAAP EPS came in at $26.50 million and $0.24, down 26.3% and 14.3% from the prior year’s quarter, respectively.

Street expects CHGG’s revenue for the quarter ending September 2024 to decline 15% year-over-year to $134.12 million. The company’s EPS for the same quarter is expected to decline 55.6% year-over-year to $0.08. However, the company surpassed consensus revenue estimates in each of the trailing four quarters.

CHGG’s POWR Ratings reflect its neutral outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has a C grade for Momentum and Growth. Within the Internet industry, it is ranked #28 out of 51 stocks. To see the additional grades of CHGG for Value, Sentiment, Stability, and Quality, click here.

The Case for Afya Limited Stock

Valued at $1.46 billion by market cap, Afya Limited (AFYA) operates as a medical education group in Brazil. The company operates through three segments: Undergrad; Continuing Education; and Digital Services. The company is based in Nova Lima, Brazil.

AFYA’s stock has gained 7.7% over the past year to close the last trading session at $16.56.

In terms of the trailing-12-month EBIT margin, AFYA’s 28.25% is 265.9% higher than the 7.72% industry average. Likewise, its 61.90% trailing-12-month gross profit margin is 68.9% higher than the 36.66% industry average.

AFYA’s net revenue for the first quarter that ended March 31, 2024, rose 13.3% year-over-year to R$804.24 million ($141.31 million). Its adjusted EBITDA increased 20.5% year-over-year to R$397.85 million ($69.90 million).

Likewise, the company’s adjusted net income grew 50.8% year-over-year to R$250.97 million ($44.10 million). Also, its adjusted earnings per share increased 54.4% year-over-year to R$2.74.

Street expects AFYA’s EPS for the second quarter ended June 2024 to increase 18.3% year-over-year to $0.34. Moreover, the company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.

AFYA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.

AFYA has a B grade for growth, Sentiment, and Quality. It is ranked #6 out of 19 stocks in the A-rated Outsourcing - Education Services industry.

Click here for the additional POWR Ratings for AFYA (Value, Stability, and Momentum).

Chegg (CHGG) vs. Afya Limited (AFYA): Which EdTech Stock Will School the Competition?

The EdTech market is growing due to the rising demand for online learning, rapid tech advancements, the importance of lifelong learning, expanding digital infrastructure, increased government support, flexible work arrangements, and innovative gamification strategies.

Both CHGG and AFYA stand to capitalize on these burgeoning industry trends. However, AFYA’s higher profitability and strong analysts' sentiments favor it as the better EdTech stock pick.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Internet industry here and the Outsourcing - Education Services industry here.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

AFYA shares were trading at $16.89 per share on Wednesday afternoon, up $0.33 (+1.99%). Year-to-date, AFYA has declined -22.98%, versus a 10.21% rise in the benchmark S&P 500 index during the same period.

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

More...