When the COVID-19 pandemic hit, we were all locked in our homes, and our education relied on our laptops or mobile screens instead of in-person classes. This led to the boom in online learning, which we all call e-learning.

In this context, I have highlighted three high-growth potential e-learning stocks, QuantaSing Group Limited (QSG), Strategic Education, Inc. (STRA), and Coursera, Inc. (COUR), that are worth adding to your watchlist.

Traditional learning is giving way to online education, and for good reason. Online learning offers students the flexibility to learn at their own pace and on their own schedule, which is especially beneficial to working professionals. Buoyed by this shift, the e-learning market has been expanding quickly and is forecasted to reach $539.88 billion by 2028, exhibiting a CAGR of 13.9%.

Moreover, generative AI made its debut in 2023, slowly making its mark on the education sector. This technology uses advanced algorithms and natural language processing to create personalized learning experiences and adaptive assessments. By analyzing data on student preferences and learning patterns, generative AI can offer customized lesson plans, virtual tutors, and interactive feedback.

As a result, the generative AI in the Edtech market is expected to grow from $268 million in 2023 to around $8.32 billion by 2033, at an impressive CAGR of 41%. This growth reflects the increasing adoption of AI-driven tools that provide educators and students with customized lesson plans, interactive learning experiences, and personalized support.

Governments are also jumping on the e-learning bandwagon, using it to train employees and educate civilians. Recent studies reveal that U.S. government agencies have invested around $11 billion in e-learning. Of that total, $1.2 billion was allocated for civilian training, while $9.8 billion was focused on training state and local government employees. This approach not only cuts costs but also boosts overall efficiency.

Given this backdrop, let’s analyze the fundamentals of three high-growth Outsourcing - Education Services stocks, beginning with #3.

Stock #3: Coursera, Inc. (COUR)

COUR operates an online learning platform that connects learners, educators, and institutions, providing accessible and relevant educational content. It operates in three segments: Consumer; Enterprise; and Degrees. The company offers guided projects, courses, specializations, online degrees, and certificates for entry-level and non-entry-level professionals, universities, and MasterTrack.

On May 20, 2024, COUR, in partnership with Microsoft Corp. (MSFT), announced four new entry-level Professional Certificates designed to prepare learners for high-growth jobs. These programs provide essential skills for starting a new career in a few months without needing a college degree or prior work experience.

In collaboration with Women In-Cloud, MSFT will also award over 5,000 scholarships by 2025 for all official Microsoft programs on Coursera. This move is expected to enhance COUR's standing as a leading educational platform and attract a wider audience.

For the second quarter of 2024 (ended June 30), COUR’s total revenue increased 10.8% year-over-year to $170.34 million. The company’s non-GAAP gross profit grew 12.8% from the year-ago value to $92.33 million. Further, its non-GAAP net income amounted to $13.78 million compared to a net loss of $334 thousand in 2023, while its non-GAAP earnings per share came in at $0.09. COUR’s adjusted EBITDA amounted to $10.39 million versus an EBITDA loss of $2.85 million in the prior year.

According to the financial outlook, COUR forecasts third-quarter revenue to range from $171 million to $175 million, with adjusted EBITDA between $0 and $4 million. For 2024, the company anticipates revenue between $695 million and $705 million and adjusted EBITDA between $24 million and $28 million, maintaining an adjusted EBITDA margin of around 4%.

Analysts expect COUR’s revenue for the third quarter (ending September 2024) to increase 5.1% year-over-year to $174.03 million and its EPS to be $0.02. Moreover, the company has surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.

COUR’s revenue has grown at a CAGR of 23.7% and 16.2% over the past year. In addition, its levered FCF has increased at a CAGR of 41.4% over the past year.

The stock has gained 10% over the past month to close the last trading session at $7.91.

COUR’s stance is apparent in its POWR Ratings. The stock has a B grade for Growth. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Among the 19 stocks in the A-rated Outsourcing - Education Services industry, COUR is ranked #15. Click here to see the additional ratings for COUR (Value, Momentum, Stability, Sentiment, and Quality).

Stock #2: Strategic Education, Inc. (STRA)

STRA is an education services company that provides access to education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills. With a market cap of $2.29 billion, the company operates through U.S. Higher Education; Australia/New Zealand; and Education Technology Services segments.

On July 13, buoyed by its strong financial performance, the company declared a quarterly dividend of $0.60 per share of common stock, payable to its shareholders on September 16, 2024.

STRA pays an annual dividend of $2.40, which translates to a yield of 2.57% at the current share price. Its four-year average dividend yield is 3.05%. Moreover, the company’s dividend payouts have increased at a CAGR of 3.7% over the past five years.

STRA’s revenue for the fiscal second quarter that ended June 30, 2024, increased 8.5% year-over-year to $312.27 million. The company’s adjusted EBITDA grew 39.3% from the year-ago value to $63.27 million. Its adjusted net income attributable to STRA came in at $32.26 million and $1.33 per share, up 64.1% and 62.2% year-over-year, respectively.

Street expects STRA’s revenue for the third quarter (ending September 2024) to increase 5.6% year-over-year to $302.06 million. However, the consensus EPS estimate of $0.80 for the same period indicates a 17.5% year-over-year decline.

For the fiscal year ending December 2024, STRA’s revenue and EPS are expected to grow 7.8% and 26.1% from the prior year to $1.22 billion and $4.69, respectively.

STRA’s revenue has grown at a CAGR of 2.8% over the past three years. The company’s net income and EPS improved at CAGRs of 36.2% and 36.1% over the same period. Further, the company’s EBIT grew at a CAGR of 16.2% over the same time frame.

Over the past year, the stock has gained 24.1%, closing the last trading session at $93.35.

STRA’s mixed fundamentals are reflected in its POWR Ratings. It has a B grade for Sentiment and is ranked #13 out of 19 stocks in the same industry.

Beyond what is stated above, we’ve also rated STRA for Growth, Value, Momentum, Stability, and Quality. Get all STRA ratings here.

Stock #1: QuantaSing Group Limited (QSG)

Headquartered in Beijing, QSG is a leading provider of online learning services across the People's Republic of China. The company offers various online courses, including financial literacy, short-video production, personal well-being, electronic keyboard, and meditation, through its QiNiu, JiangZhen, and QianChi brands.

On June 25, QSG opened its first office outside Mainland China in Hong Kong, located in the prominent Exchange Square. This new office marks a significant milestone in QSG’s expansion and global outreach, positioning the company to pursue new business opportunities with an international focus.

In addition, the company launched “White Paper on Unveiling Golden Opportunities in China's Silver Economy, 2023,” in partnership with China Insights Consultancy (CIC), offering valuable insights into China’s aging population, including demographic trends and consumption patterns.

This launch underscores QSG’s commitment to the growing elderly market and positions the company as a key player in addressing the needs of this expanding sector.

On March 20, through a wholly-owned PRC subsidiary, the company partnered to form a PRC limited partnership enterprise to expand its e-commerce and AI businesses. QSG has committed RMB100 million ($14 million) for a 43.29% stake, with an initial capital contribution of RMB3 million already fulfilled.

In the third quarter that ended on March 31, 2024, QSG reported a revenue of RMB945.57 million ($130.96 million), up 17.1% year-over-year. The company’s gross billings of individual online learning services came in at RMB981.50 million ($135.94 million), reflecting an increase of 22.1% from the prior year. In addition, its adjusted net income amounted to RMB31.92 million ($4.42 million) and RMB0.19 per ordinary share, reflecting an increase of 47.1% and 72.7% year-over-year, respectively.

Looking ahead, QSG forecasts its revenue for the fourth quarter (ended June 2024) to range between RMB900 million ($126.04 million) and RMB930 million ($130.24 million), representing a year-over-year increase of 8.7% to 12.3%.

Analysts expect QSG’s revenue for the fiscal year (ended June 2024) to increase 17.3% year-over-year to $496.72 million.  Moreover, the company is expected to post an earnings per share of $0.16 for the same period.

Shares of QSG have gained 4.5% year-to-date price to close the last trading session at $1.66.

It’s no surprise that QSG has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and Quality. Within the same industry, it is ranked #3.

Click here to see the other ratings of QSG for Growth, Momentum, Stability, and Sentiment.

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STRA shares were trading at $92.65 per share on Wednesday afternoon, down $0.70 (-0.75%). Year-to-date, STRA has gained 1.40%, versus a 11.54% rise in the benchmark S&P 500 index during the same period.

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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