Universal Technical Institute: A Counter-Cyclical, For-Profit Trade School In The Beginning Stages Of A Turnaround – Seeking Alpha
Summary
- We’ve tracked UTI closely for years, anticipating it would benefit enormously once the cycle turned.
- The stock has traded along all-time lows for the past 5 years, largely because it has struggled operationally as its core business is counter-cyclical.
- UTI is a prime beneficiary of previous governmental regulations, as they now have minimal competition.
- Trading at 8x 2019 EBITDA, with a business model that has tremendous operating leverage, we think UTI will generate its current market cap in cash in 5 years as student enrollments are set to erupt higher.
Overview
Universal Technical Institute (UTI) is the nation’s leading postsecondary, for-profit trade school specializing in training students to become technicians in automotive, diesel, & motorcycle repair. Additionally, UTI offers programs for students to specialize in welding and other machining fields. The school has many programs, ranging in tuition from $26,000 – $46,000 and between 9-18 months in duration. Their target markets are high school graduates, recent veterans, and adults in the midst of a career transition. UTI has 13 campuses in 9 states across the US and is accredited by the Accrediting Commission of Career Schools and Colleges (ACCSC). The company has been in business for over 5 decades and is listed on the NYSE, yet its only sell-side analyst recently retired, the stock is thinly traded and has a sub-$150 million market cap – making it a good candidate for an overlooked stock.