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?
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.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.