Summary
Universal Technical Institute offers hands-on training for careers in automotive, energy and aviation, partnering with big names like Ford and BMW. Since 2019, UTI’s revenue has increased from $331 million to $607 million, while its profit margins have also improved from 46% to 54%. They expect a revenue CAGR of 10% annually until 2029. $UTI has recorded share price growth of 92% in the last year. But its current share price is far from its historical peak, and the consensus analyst price target signals more upside.
Clearwater Analytics operates a SaaS business model, providing a platform that helps financial institutions manage investment data more efficiently. It manages $6.4 trillion in assets for over 1,200 clients worldwide, generating revenues through a subscription model. It has grown rapidly with a 23% annual revenue growth since 2016, and expects to continue this in the coming years. The company sees strong growth potential, especially as the global market for managed assets is set to expand significantly.
Universal Technical Institute ($UTI)
$16.43 – Share price at time of writing
Source: tradingview.com
Summary:
- Share price at the time of writing: $16.43
- Universal Technical Institute provides hands-on technical training in the automotive and related industries. Its recent acquisition of Concorde Colleges allows its expansion into healthcare training.
- The vocational education industry is poised for growth, with careers in healthcare and trades set to boom.
- Since 2019, UTI’s revenue has risen from $331 million to $607 million, and its profit margins have grown from 46% to 54%. UTI aims to continue this growth.
- The consensus analyst price target for $UTI shows it may still have potential to grow.
What they do:
Universal Technical Institute ($UTI) is an education provider of technical training, focused on skills required in the automotive and related industries. Its programs cover fields like Energy Technology, Aviation Maintenance, Robotics, and Automotive/Diesel Technology. UTI offers hands-on training through campuses across the US and partners with renowned industry leaders like Ford, BMW, Mercedes-Benz and Cummins.
UTI operates under brands such as Universal Technical Institute, Motorcycle Mechanics Institute and Marine Mechanics Institute. In 2022, UTI expanded its offerings by acquiring Concorde Career Colleges, allowing it to venture into healthcare training programs.
Since its acquisition of Concorde, the company has reported revenues in two main segments:
- UTI: revenues from UTI’s training programs, which come from its 16 campuses and any manufacturer or dealer sponsored training programs. Last year, UTI generated approximately 71% of the company’s total revenues.
- Concorde: revenues from Concorde’s programs, which are mainly generated through its 17 campuses and online. Concorde revenues made up the remainder of the company’s revenue split last year.
Unsurprisingly, UTI generates nearly all its operating revenues from tuition and fees, with some supplementary revenues coming from the sales of textbooks and supplies. Currently, UTI only operates within the US.
What the market is saying:
$UTI as a stock doesn’t get discussed too frequently. The majority of discussions are around how the company is as an education provider. However, plenty of analyses have been written around UTI’s growth prospects recently, largely thanks to UTI’s impressive share price performance over the last year.
Source: quiverquant.com
Recent comments from Seeking Alpha:
“The management has discussed its North Star Strategy, under which it aims to achieve a 10% CAGR between 2024 and 2029, while also expanding its adjusted EBITDA margin to 20%. I believe this is an achievable goal for UTI, considering that the company is very clearly positioned in an expansionary mode.”
- Weebler Finance
“Despite having a good business with excellent fundamentals and excellent growth prospects, from my point of view, the company is a “Hold”.”
- Davide Devetak
Why $UTI could be valuable:
Industry
Universal Technical Institute operates within the vocational education industry, with programs designed to equip students with practical skills to enable them to enter the workforce quickly. As the cost of traditional college degrees continues to rise, more students in the US, where UTI operates, are turning to vocational education.
In addition to cost considerations, there is a growing demand for skilled trades across the country. Fields like automotive technology, HVAC, welding and electrical work are experiencing labor shortages in the US, with job growth expected to outpace the average across other industries. The US Bureau of Labor Statistics projects a 9% growth for HVAC technicians and a 11% increase in demand for electricians in the next 10 years, for example.
UTI’s acquisition of Concorde was also well-planned, with UTI aiming to capture the 2 million new jobs that the US healthcare industry is projected to generate every year in the next decade. UTI’s research shows that healthcare occupations are expected to grow the fastest out of all occupational groups – at 15.4% from 2022 to 2032.
In addition to industry tailwinds, UTI began implementing its growth strategy five years ago, which it dubs the “North Star Strategy”. The recently completed first phase of this strategy saw its number of campuses triple, its student numbers double and its profitability increase by five-fold. The company is now set to begin the second phase of the North Star strategy, which involves the launch of six new programs every year and two new campuses annually from 2025 to 2029.
UTI estimates this growth strategy to bring a revenue CAGR of 10% a year to 2029.
Financials
True to its word, $UTI has recorded strong revenue growth in the last few years – proof that its North Star strategy has been effective. UTI has posted a minimum annual revenue growth of 20% since 2019, which saw its revenue jump from $331m in 2019 to $607m last year.
$UTI TTM revenues per quarter from 2009 to 1 July 2024:
Source: macrotrends.com
Accordingly, its gross profit margins had also increased from about 46% five years ago to 54% last year, a sign of scale and efficiency. While its EBITDA margin doesn’t quite reach its North Star goal of 20%, this has nearly quadrupled from 2.4% in 2019 to over 8% last year.
However, while its top line revenue growth has been impressive, its bottom line has not yet shown a consistently clear trend.
$UTI TTM net income per quarter from 2009 to 1 July 2024:
Source: macrotrends.net
Despite this, UTI boasts a decently robust balance sheet. Its latest statement in July showed that its current assets comfortably cover current liabilities. Over one-third of UTI’s current liabilities is also composed of unearned revenues, which generally translates into future revenue. UTI does have a material balance of long-term debt and leases, however the balance may be covered by the company’s asset balance. A large portion of its long-term debt was used to fund acquisitions.
Price action
$UTI has recorded share price growth of 92% in the last year. Despite this strong growth, its current share price is far from its historical peak, and the consensus analyst price target signals a potential upside of approximately 29%.
What the risks are:
Long history: Universal Technical Institute was founded in 1965. This long history can be both good and bad – while it has shown resilience as a business model by having survived market cycles overtime, it has exhibited relatively slow growth for its history.
High capital and operating costs: UTI’s programs are capital-intensive, requiring significant investment in equipment, facilities and specialized instructors. If operational expenses rise due to inflation or the need for new technology, UTI could face tighter profit margins.
Dependence on student aid: Some of UTI’s revenues rely on federal financial aid programs, with a portion of its revenue coming from students who receive federal funding. Any regulatory changes that reduce access to grants or student loans, or impose stricter conditions, could impact UTI’s ability to enroll students.
Bottom line: Universal Technical Institute offers hands-on technical training in fields like automotive, energy and aviation, partnering with companies like Ford and BMW. In 2022, UTI expanded into healthcare training by acquiring Concorde Career Colleges. UTI’s growth plan, called the “North Star Strategy,” has led to major expansion, including more campuses and increased student enrollment. This is set to continue with further plans to launch new programs and campuses through 2029. With strong demand for skilled workers in both trades and healthcare, UTI expects to keep growing at a rate of 10% per year while its profit margins continue to improve.
Clearwater Analytics Holdings ($CWAN)
$25.84 – Share price at time of writing
Source: tradingview.com
Summary:
- Share price at the time of writing: $25.84
- Clearwater Analytics Holdings offers a cloud-based SaaS platform that simplifies investment data management for financial institutions.
- Since 2016, the company has grown revenues at a CAGR of 23% and expects to continue this trend in the next few years.
- Clearwater is well-positioned for growth, both from industry tailwinds and its effective growth strategy.
- $CWAN is up 32% year-to-date, close to its all-time high. The consensus analyst price target suggests that $CWAN is trading at fair value.
What they do:
Clearwater Analytics Holdings ($CWAN) provides a cloud-based SaaS platform that automates investment data management for financial institutions. Its software simplifies investment accounting operations, allowing clients to focus on strategic tasks like asset allocation and investment selection.
Its platform aggregates data from over 2,800 feeds and over four million securities. Clearwater now has over 1,200 clients all over the world, handling information for over $6.4 trillion in global assets daily. Its software allows clients to replace legacy systems with its more powerful one, helping them make informed decisions on investment performance and risk management, while reducing costs, errors and operational risks across multi-asset, multi-currency portfolios.
Clearwater has a 100% recurring revenue model. The company charges clients a fee based on the amount of assets they manage through Clearwater’s platform. With the majority of assets on the platform being fixed income assets, Clearwater’s revenues are highly predictable and generally see very low levels of volatility. As of its latest financial report, it generated 82% of its revenues in the US and the remainder from the rest of the world.
What the market is saying:
Interestingly, $CWAN barely gets mentioned on public forums.
Why $CWAN could be valuable:
Industry
Clearwater Analytics operates within the broader software-as-a-service industry, but has carved its own niche in the fintech industry. As an investment software provider, Clearwater competes with many other firms that have been in the market for decades, of which it dubs “Legacy Competitors”. Operating in a highly complex and regulated industry, Clearwater believes that its focus on simplification, automation and a newer user interface than its peers would allow it to gain market share overtime.
Clearwater estimates its total addressable market (TAM) to be $11 billion globally, a figure bolstered by its 2022 acquisition of JUMP Technology, which enabled it to expand into European markets. Importantly, this TAM does not factor in the expected growth in total funds under management (FUM), which are projected to reach $145 trillion by next year. Since Clearwater generates revenue as a percentage of the FUM it processes through its platform, this market expansion represents a significant growth opportunity.
Clearwater’s business model is further strengthened by its impressive 99% gross revenue retention rate and an 80% competitive win rate, demonstrating the company’s ability to retain customers and successfully attract new business. With its cutting-edge technology and strong operational metrics, Clearwater is well-positioned for continued growth.
Financials
$CWAN only debuted on public markets in 2021, but it has demonstrated strong growth well before its IPO. Since 2016, the company has posted an impressive CAGR of 23% in annual recurring revenue (ARR). This sustained revenue growth has been driven by a combination of acquiring new clients and increased spending from existing customers. Clearwater aims to maintain a minimum 20% revenue CAGR in the next few years.
Clearwater’s annual revenue from 2016 to 2023
Source: Clearwater Investor Presentation
Like many other SaaS companies, Clearwater records a high level of gross profit margin, averaging at about 70-75% in the last five years. Despite this however, Clearwater has not recorded consistent profitability. This can be attributed to high levels of marketing and R&D expenses, the latter of which is part of Clearwater’s strategy as it aims to further improve its technology. R&D expenses equaled nearly 35% of Clearwater’s revenues last quarter.
$CWAN’s quarterly net income from 2921 to 2024:
Source: macrotrends.net
Despite its lack of profitability, $CWAN’s latest balance sheet shows high liquidity and solvency ratios, with its cash balance alone more than enough to cover total liabilities. However, it’s important to note that Clearwater has had negative free cash flows in many of the recent quarters. Its cash balance is highly likely from its recent follow-on equity raise of $275 million back in March.
Price action
$CWAN is up 32% year-to-date, closing in on its all-time high share price that it recorded back when it first listed. The consensus analyst price target currently shows that $CWAN may be fairly valued at its current market price.
What the risks are:
Lack of profitability: Despite Clearwater’s impressive double-digit revenue growth, the company’s inability to turn this into profitability raises concerns about the sustainability of its operations and financial health.
Share dilution: Due to its ongoing lack of profitability, Clearwater has been relying on raising capital through equity, and if this practice continues, shareholders may face dilution of their holdings.
High competition: While Clearwater prides itself as the disruptor within its field, the existence of older, larger legacy competitors who have built their name in the industry may make it more difficult for Clearwater to capture market share.
Bottom line: Clearwater Analytics Holdings ($CWAN) offers a SaaS platform that automates investment data management for financial institutions. It has grown to over 1,200 clients globally, and now handles data for $6.4 trillion in assets. Clearwater has recorded a revenue CAGR of 23% since 2016, and aims to continue this in the near future. Its product is well-positioned to capture the growth opportunities that its industry is expected to see in the coming years.
