Rosetta Stone’s IPO (RST) is better than Bridgepoint Education’s IPO (BPI)

March 22, 2020

IPO Analysis, Grading, Scoring from
Rosetta Stone IPO:
Bridgepoint Ed IPO:
both scheduled for April 13wk

(1) Both are educational stocks
. Rosetta Stone provides language learning software
. Bridgepoint Ed provides post-secondary online education

(2) Both report revenues for 2008 in the $200mm range & both were profitable in 2008

(3) Both have good internal growth track records

(4) The trailing 12 mos P/E ratios are in the same range at price range mid-points: 23.4x for Rosetta; 29.7x for Bridgepoint

(1) Rosetta is a market segment leader with a differentiated product

(2) 95% of Rosetta’s sales are in the US, and growth plans are set for international expansion

(3) Rosetta’s gross margin is higher, 87% versus 71% for Bridgepoint

(4) Price-to-book value is more favorable for Rosetta: 2.7 versus 20.8 for Bridgepoint

(5) Online comparables to Bridgepoint suggest it is fairly priced (trailing 12 months) relative to Capella Education (CPLA) at 28x and Strayer Education (STRA) at 29x. The range is wide, however, with Apollo (APOL) at 15x ($10bb market cap) and Grand Canyon (LOPE) at 93x ($677mm market cap).

Notice that post-secondary online ed stocks sold off 15-17% since March 31, so there are some headwinds in the sector.

Rosetta Stone IPO:
Bridgepoint Ed IPO:
Disclosure: No positions