G8 Education (ASX:GEM) Shares Drop 4%, Is It a Buy?

The G8 Education Limited (ASX: GEM) share price has had a rough start to the day, down 4%, making it the biggest decline in the ASX200. Is this a buying opportunity?

About G8

G8 Education is the largest ASX listed childcare provider, it also has a handful of childcare centres in Singapore. At the end of 2018, G8 had more than 500 childcare centres in Australia. G8 Education has used an acquisition strategy to grow the number of brands it operates including Buggles, The Learning Sanctuary, Kool Kids, Bambinos and Creative Garden.

Why Is GEM Down?

G8 hasn’t released any official announcements to investors today, or for the last ten days for that matter.

The sell-off could be due to an analyst downgrade, or just a pull-back to a more reasonable valuation.

G8 shares have risen 56.4% over the last six months and 20% in just the last three months. The share price is currently around $3.15, up from less than $2 in October 2018. This is all despite a lacklustre half-year report, suggesting that the shares have been boosted by investor sentiment.

Is It A Buy?

One appealing aspect of G8 is the fully-franked 5.31% dividend yield it currently offers. They also operate in a space that will continue to grow with an increasing population so they arguably have positive growth prospects.

In saying that, the share price was less than $2 in October, and there hasn’t been a lot of positive news since then to justify the huge share price increase.

I might consider G8 shares at a different price, but I think at the moment they are overvalued. In the education sector, I prefer companies like IDP Education Limited (ASX: IDP) which I wrote about last month.

If education isn’t your sector, check out the free report below for some more ideas.

Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.

Free report: 3 cloud stocks to buy now

As we emerge from COVID-19, some tech companies are growing faster than ever. Rask’s investment analysts have identified 3 growth stocks set to benefit. Big time.

We’ll send you our report for free, including the names, ticker codes and analysis when you enter your email address below.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Free report: 3 cloud stocks to buy now

As we emerge from COVID-19, some tech companies are growing faster than ever. Rask’s investment analysts have identified 3 growth stocks set to benefit. Big time.

Click here to access this report for free, including the names, ticker codes and analysis.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading: