Why Universal Technical Institute (UTI) is back on investors’ radar
Universal Technical Institute (UTI) recently posted a quarter where revenue and earnings came in ahead of forecasts, and also unveiled plans for several new campuses that will extend its transportation, skilled trades, and healthcare footprint.
See our latest analysis for Universal Technical Institute.
That growth story is showing up in the share price too, with the stock at $35.58 after a 29.38% 90 day share price return and a very large 3 year total shareholder return, although recent 7 day trading has cooled some of that momentum.
If the campus expansion theme has you thinking about where growth could show up next, this is a good moment to widen your research and check out 18 top founder-led companies
With revenue at US$855.0m, net income of US$53.7m, and the share price only about 5% below the average analyst target, the key question is whether UTI is still mispriced or if the market is already accounting for future growth.
Price-to-Earnings of 36.5x: Is it justified?
At $35.58, Universal Technical Institute is trading on a P/E of 36.5x, which screens as expensive relative to both its industry and peer group.
The P/E ratio links the share price to earnings per share, so a higher multiple usually reflects the market paying up for current profitability or expected earnings growth. For an education services provider like UTI, that often ties back to how confident investors are that enrollment, margins, and campus expansion can support higher profits over time.
Here, the market is assigning UTI a 36.5x P/E compared with an 18x average for the broader US Consumer Services industry and a 25.5x average for its closer peer group. It is also above an estimated fair P/E of 20.3x. The market could move toward that level if expectations cool or earnings catch up more slowly than the current price implies.
Explore the SWS fair ratio for Universal Technical Institute
Result: Preferred multiple of Price-to-Earnings of 36.5x (OVERVALUED).
However, the rich P/E and a share price only about 5% below the US$37.33 analyst target leave less room if sentiment or earnings expectations soften.
Find out about the key risks to this Universal Technical Institute narrative.
Another view: what the cash flow model says
While the P/E of 36.5x suggests a rich price tag, the SWS DCF model points in the opposite direction, with an estimated future cash flow value of just $2.40 versus the current $35.58 share price. That gap implies a very different risk profile. Which signal do you trust more?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Universal Technical Institute for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 58 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
The mix of strong recent numbers and valuation question marks makes this a stock you may want to look at sooner rather than later so you can weigh the 1 key reward and 1 important warning sign.
Ready to find your next investment idea?
If UTI has sparked your interest, do not stop here. Widen your opportunity set by checking focused stock ideas that match different risk and return preferences.58 high quality undervalued stocks
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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