Chegg, Inc (NYSE: CHGG)

Sector: Consumer Defensive Industry: Education & Training Services CIK: 0001364954
Market Cap 60.94 Mn
P/B 0.42
P/E -0.79
P/S 0.14
ROIC (Qtr) -52.64
Div Yield % 0.00
Rev 1y % (Qtr) -43.08
Total Debt (Qtr) 77.91 Mn
Debt/Equity (Qtr) 0.53
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About

Chegg, Inc., a prominent player in the online learning industry, operates under the ticker symbol CHGG. The company offers a variety of services and products designed to cater to the educational needs of students, educators, and businesses. Chegg's primary business activities revolve around providing online learning resources, including subscription-based services, advertising, and other educational offerings. Chegg's main products and services include Chegg Study, Chegg Writing, Chegg Math, Busuu, and Chegg Skills. Chegg Study is a subscription-based...

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Investment thesis

Bull case

  • Strong operating cash flow of 42.63M provides robust 0.55x coverage of total debt 77.91M, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 371.15M provides 4.76x coverage of total debt 77.91M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 42.63M provides exceptional 36.12x coverage of interest expenses 1.18M, showing strong debt service capability.
  • Tangible assets of 371.15M provide exceptional 11.55x coverage of deferred revenue 32.15M, showing strong service capability backing.
  • Long-term investments of 15.28M provide solid 0.99x coverage of long-term debt 15.36M, indicating strategic financial planning.

Bear case

  • Operating cash flow of 42.63M barely covers its investment activities of 364.65M, with a coverage ratio of 0.12, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 42.63M provides insufficient coverage of deferred revenue obligations of 32.15M, which is 1.33x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of 42.63M shows concerning coverage of stock compensation expenses of 40.44M, with a 1.05 ratio indicating potential earnings quality issues.
  • Operating earnings of (67.62M) show weak coverage of depreciation charges of 87.12M, with a -0.78 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 7.68M provides weak coverage of capital expenditures of 34.95M, with a 0.22 ratio suggesting additional external financing needs for growth initiatives.

Product and Service Breakdown of Revenue (2024)

Geographical Breakdown of Revenue (2024)

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 0.28 0.71
EV to Cash from Ops. EV/CFO 2.45 6.80
EV to Debt EV to Debt 1.34 11.15
EV to EBIT EV/EBIT -1.54 112.78
EV to EBITDA EV/EBITDA -4.58 6.48
EV to Free Cash Flow [EV/FCF] EV/FCF 13.58 5.57
EV to Market Cap EV to Market Cap 1.71 582,173.64
EV to Revenue EV/Rev 0.23 1.74
Price to Book Value [P/B] P/B 0.42 -3.80
Price to Earnings [P/E] P/E -0.79 -1.70
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 11.73
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.21
Dividend per Basic Share Div per Share (Qtr) 0.00 0.25
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 1.69
Interest Coverage Int. cover (Qtr) -57.31 53.05
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 60.02 -82.12
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -74.89 25.11
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.54
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 90.78 -39.04
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 96.27 -34.79
EBIT Growth (1y) % EBIT 1y % (Qtr) 89.84 -40.70
EBT Growth (1y) % EBT 1y % (Qtr) 89.71 -52.53
EPS Growth (1y) % EPS 1y % (Qtr) 91.48 -29.51
FCF Growth (1y) % FCF 1y % (Qtr) -92.09 -36.51
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -41.58 -3.42
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.18 0.63
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 0.18 0.73
Current Ratio Curr Ratio (Qtr) 0.95 1.63
Debt to Equity Ratio Debt/Equity (Qtr) 0.53 3.83
Interest Cover Ratio Int Coverage (Qtr) -57.31 53.05
Times Interest Earned Times Interest Earned (Qtr) -57.31 53.05
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 4.40 -30.62
EBIT Margin % EBIT Margin % (Qtr) -15.10 -82.13
EBT Margin % EBT Margin % (Qtr) -15.37 -47.07
Gross Margin % Gross Margin % (Qtr) 62.80 50.48
Net Profit Margin % Net Margin % (Qtr) -17.10 -48.61