Here's why the IDP Education (ASX:IEL) share price jumped 15% in July

July was a great month for IDP Education shares…

| More on:
rising asx share price represented by happy woman dancing excitedly

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

The IDP Education Ltd (ASX: IEL) share price was on form in July.

The language testing and student placement company's shares rose as sizeable 15% over the period

This means the IDP Education share price is now up almost 37% since the start of the year.

Why did the IDP Education share price storm higher in July?

There were a couple of catalysts for the strong rise by the IDP Education share price last month.

One of those was the announcement of a major new acquisition on the first day of the month. IDP Education revealed that it has entered into an agreement to acquire the British Council's Indian International English Language Testing System (BC IELTS India) operations for 130 million pounds (~A$240 million).

This deal means that IDP Education will soon be the sole distributor of IELTS in the key Indian market.

In addition, the acquisition is expected to be significantly accretive to earnings. Management estimates that the transaction will be ~13% earnings per share accretive (pre-synergies) on a pro forma calendar year 2019 basis. It also sees scope for material combination benefits, with estimated run-rate synergies of A$6 million to A$8 million expected to be delivered within 24 months of completion.

What else supported its shares?

Also boosting the IDP Education share price was the positive reaction to the deal by brokers.

For example, in response to the announcement, Goldman Sachs retained its buy rating and lifted its price target on its shares to $35.00.

Based on the current IDP Education share price, this price target implies potential upside of 24% over the next 12 months even after last month's gains.

The broker was a fan of the deal and suspects that it may not be the final acquisition the company makes.

Goldman commented: "In our view, the acquisition of BC's Indian IELTS operations is an indication of IEL's willingness to deploy capital toward synergistic acquisitions, and may pave the way for further transactions in other countries. While we take no view on any specific transactions, we move our target price methodology to DCF and apply an uplift of A$3.20 to our DCF to capture the potential value from further acquisitions. Our new 12-month TP is A$35.00 […] we reiterate our Buy rating."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Idp Education Pty Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A young man wearing a black and white striped t-shirt looks surprised.
Broker Notes

These ASX 200 shares could rise 25% to 80%

Analysts think big returns could be on offer from these shares.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were nervous this Friday, ending the week on a sour note.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Market News

Where to invest $5,000 into ASX 200 shares this month

The team at Bell Potter is bullish on these names. But why?

Read more »

Man pointing an upward line on a bar graph symbolising a rising share price.
52-Week Highs

8 ASX 200 shares hitting multi-year highs today

These shares have defied the trend, hitting new price milestones amid a day in the red for the ASX 200.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why EOS, Evolution Mining, Renascor, and Woodside shares are jumping today

These shares are ending the week on a high. But why?

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Accent, Cettire, Ioneer, and Pro Medicus shares are dropping today

These shares are ending the week in the red. What's going on?

Read more »

A group of three miners in hard hats and high visibility vests confer at a rocky mining site.
Broker Notes

Up 66% in a year, just how much more upside does Macquarie tip for Perseus Mining shares?

Just how much higher might Perseus Mining shares soar? Here’s what Macquarie had to say about the ASX 200 gold…

Read more »