Afya Ltd (NASDAQ: AFYA)

Sector: Consumer Defensive Industry: Education & Training Services CIK: 0001771007
Market Cap 1.26 Bn
P/B 1.43
P/E 9.31
P/S 1.87
ROIC (Qtr) 73.27
Div Yield % 1.65
Rev 1y % (Qtr) 12.02
Total Debt (Qtr) 551.87 Mn
Debt/Equity (Qtr) 0.63
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About

Afya Ltd, known by its ticker symbol AFYA, is a prominent player in the education industry, specifically focused on medical education in Brazil. Established in 2019, the company has made its mark on the Nasdaq Global Select Market. Afya's primary business activities revolve around providing medical education. The company offers a variety of courses and programs in medicine, dentistry, nursing, and other health sciences. These are available through their medical education platform, which can be accessed both online and offline. Additionally, Afya...

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Investment thesis

Bull case

  • Strong operating cash flow of 289.84M provides robust 0.53x coverage of total debt 551.87M, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 289.84M provides exceptional 87.51x coverage of minority interest expenses 3.31M, showing strong core operations.
  • Operating cash flow of 289.84M provides strong 68.50x coverage of stock compensation 4.23M, indicating sustainable incentive practices.
  • Robust free cash flow of 258.82M exceeds capital expenditure of 31.02M by 8.34x, indicating strong organic growth funding capability.
  • Retained earnings of 456.70M provide full 1.23x coverage of long-term debt 372.02M, indicating strong internal capital position.

Bear case

  • Operating cash flow of 289.84M barely covers its investment activities of (110.22M), with a coverage ratio of -2.63, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Cash reserves of 184.94M provide limited coverage of acquisition spending of (49.20M), which is -3.76x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 258.82M represents just -2.06x of debt issuance (125.54M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • High financing cash flow of (149.57M) relative to working capital of (7.05M), which is 21.22x suggests concerning dependence on external funding for operational needs.
  • Debt issuance of (125.54M) significantly exceeds working capital of (7.05M), which is 17.81x, indicating potentially unsustainable leverage for operational funding.

Segments [axis] Breakdown of Revenue (2023)

Segments [axis] Breakdown of Revenue (2023)

Peer comparison

Companies in the Education & Training Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 EDU New Oriental Education & Technology Group Inc. 9.35 Bn 24.58 1.82 0.78 Bn
2 TAL TAL Education Group 6.18 Bn 22.22 2.20 0.38 Bn
3 GHC Graham Holdings Co 5.47 Bn 12.27 1.91 1.17 Bn
4 LAUR Laureate Education, Inc. 5.20 Bn 25.55 3.29 0.44 Bn
5 LOPE Grand Canyon Education, Inc. 4.62 Bn 21.85 4.23 0.11 Bn
6 LRN Stride, Inc. 3.61 Bn 11.32 1.43 0.56 Bn
7 ATGE Covista Inc. 3.46 Bn 13.66 1.83 0.73 Bn
8 PRDO PERDOCEO EDUCATION Corp 2.84 Bn 42.39 1.73 0.06 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.08 0.71
EV to Cash from Ops. EV/CFO 0.49 6.80
EV to Debt EV to Debt 0.26 11.15
EV to EBIT EV/EBIT 0.56 112.78
EV to EBITDA EV/EBITDA 0.49 6.48
EV to Free Cash Flow [EV/FCF] EV/FCF 0.55 5.57
EV to Market Cap EV to Market Cap 0.11 582,173.64
EV to Revenue EV/Rev 0.21 1.74
Price to Book Value [P/B] P/B 1.43 -3.80
Price to Earnings [P/E] P/E 9.31 -1.70
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 11.73
Dividend Payout Ratio % Div Payout % (Qtr) 15.50 2.21
Dividend per Basic Share Div per Share (Qtr) 0.23 0.25
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 1.56 1.69
Interest Coverage Int. cover (Qtr) 2.39 53.05
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -37.07 -82.12
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 20.88 25.11
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.54
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 27.91 -39.04
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 26.99 -34.79
EBIT Growth (1y) % EBIT 1y % (Qtr) 35.20 -40.70
EBT Growth (1y) % EBT 1y % (Qtr) 34.99 -52.53
EPS Growth (1y) % EPS 1y % (Qtr) 27.01 -29.51
FCF Growth (1y) % FCF 1y % (Qtr) 20.82 -36.51
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 20.57 -3.42
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.07 0.63
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 0.55 0.73
Current Ratio Curr Ratio (Qtr) 0.98 1.63
Debt to Equity Ratio Debt/Equity (Qtr) 0.63 3.83
Interest Cover Ratio Int Coverage (Qtr) 2.39 53.05
Times Interest Earned Times Interest Earned (Qtr) 2.39 53.05
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 47.60 -30.62
EBIT Margin % EBIT Margin % (Qtr) 202.25 -82.13
EBT Margin % EBT Margin % (Qtr) 21.85 -47.07
Gross Margin % Gross Margin % (Qtr) 65.00 50.48
Net Profit Margin % Net Margin % (Qtr) 20.10 -48.61