Education Development International (EDD)
Posted on February 6, 2009 by Richard Beddard
Filed Under Companies |
So far, so recession proof
Here’s a rarity, a company beating expectations that were positive anyway.
It’s Education Development International (EDD), the examinations company I berated last July and commended to Money Observer readers in August (pdf). iBall lampooned it in September.
Chief executive Nigel Snook has had the latest laugh. £1,000 invested in EDI last summer is worth over £1,500 today, a quicker return than I expected.
It’s very good news for smaller company investors, and one in particular, the friend who told me about EDI. Perhaps it’s a lesson not to disregard all tips received from mates in pubs.
You can read the AGM statement. EDI, which sells qualifications and the examinations, syllabuses and services like marking that go with them, is benefitting from the growth in vocational education generally, a depreciating pound which makes sales of its foreign qualifications more profitable, and a temporary windfall from the introduction of a new transport qualification.
Will it last? The directors think so. Chairman Richard Price bought over half a million shares at prices between 43p and 45p in January. Mr Snook also bought 50,000 shares and a non-executive director, Barrie Clarke, bought 100,000. Between them, they own 9.1% of the company, so they’re committed.
Valuing EDI against its long-term earnings is tricky though. It pays no tax because of huge losses developing and marketing Goal, a computer aided learning system. It’s likely to from 2010 though, which will reduce profit.
Those losses aren’t relevant now its main business is qualifications, and Goal is mostly a memory of the dot.com boom and bust. Erasing its losses from history gives a five-year price earnings ratio of about 17 at its newly inflated price, which puts EDI just out of my buy-zone.
But as confidence grows that Mr Snook’s right, and EDI is beginning to reap the rewards of years of investment in its protracted turn around, then growth investors will assume higher profits in future, than those in the past.
And, in the short-term, they’ll probably be attracted to a company that has yet to detect any impact at home, or abroad, from the recession.
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