Summary
- The company essentially has two pillars that form its competitive advantage namely the technology platform and the relationships it has with its university partners.
- Enrollment has grown at a healthy pace with the growth of 16.9% and 56.6% for the Graduate Program Segment and Alternative Credential Segment respectively year over year.
- The company is currently trading at a forward price to sales ratio of 2.79x and growing revenue at an impressive rate of 39.31% 5-year CAGR.
- I believe adding a few speculative stocks to a diversified portfolio is a good way for investors to get better returns. One such company that piqued my interest after going through the company's business strategy and fundamentals is online education provider 2U Inc (TWOU).
Business Analysis
Just a brief background on the company, 2U Inc is a provider of education technology for non-profit colleges and universities. The company builds delivers and supports a wide array of online and hybrid courses. The company has two main business segments namely, the Graduate Program Segment and the Alternative Credential Segment. These segments made up 72.6% and 27.4% of revenue in 2019 respectively.
The Graduate Program Segment works directly with non-profit colleges and universities to provide technology and resources to enable the digital delivery of degree programs. These programs are aimed to be of identical quality to the school’s in-person offerings. The Alternative Credential Segment provides online short courses and boot camps for specific technical skills. Bootcamps and Online courses are a dime a dozen nowadays as the platforms to stream video on the internet has become commoditized. However, what differentiates 2U’s offerings are its partnerships with non-profit colleges and universities. The company’s courses are built in collaboration with these schools and often times carry their branding.
The company essentially has two pillars that form its competitive advantage namely the technology platform and the relationships it has with its university partners. On the technology side, 2U provides front-end and back-end cloud-based SAAS technology for an online teaching platform, admissions/ CRM, and content development. The company also leverages data analytics and algorithms to select which offerings to launch as well as market to prospective students. The company also has relationships with 75 non-profit colleges and universities including some of the country’s top institutions. There are a couple of “heavy hitters” on that list such as Harvard, University of Pennsylvania, John Hopkins, etc.
