IDP Education Ltd (ASX: IEL) shares have been having a tough time in recent months.
Since hitting a 52-week high of $32.17 in February, the language testing and student placement company's shares have crashed 34%.
This leaves this ASX 200 growth share trading within a whisker of a 52-week low.
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Should investors buy this ASX 200 growth share?
The team at Goldman Sachs believes that the weakness in the IDP Education share price has created a buying opportunity for investors.
According to a note, the broker has reiterated its buy rating with a trimmed price target of $28.90. This implies a potential upside of 36% for investors over the next 12 months.
Goldman notes that the ASX 200 growth share has been sold off since it announced the loss of its language testing monopoly in Canada.
However, even after adjusting its earnings estimates to reflect a potential 30% loss of market share in Canada, the broker believes its shares have been significantly oversold. Particularly given the expected growth of its student placement business. It explains:
[W]e are comfortable with our new IELTS volume estimates (-1.3%/+4.2% FY24/25E) which implicitly assume +7% p.a. market growth and ~30% share loss of Canada testing volumes over FY24/25 (vs ~80-90% share currently). We highlight that each ~10% of Canada share loss would reduce FY24E group EBIT by ~3%, and note that >80% of our incremental earnings over FY23-25E is driven by Student Placement. Said another way, while IELTS may continue to consume investor focus in the near-term, the potential earnings delta on our sensitivity analysis is relatively minor. We believe focus will shift back to Student Placement as the competition impact becomes clearer.
Overall, Goldman feels the risk/reward on offer with its shares is attractive, making it a top buy now. It adds:
With greater confidence regarding the potential outcomes for IELTS volumes and the relatively minor earnings impact of downside/upside scenarios, in addition to the long-term structural growth opportunity in Student Placement, we believe IEL represents attractive value at ~1.7x PEG on FY23-26E EPS CAGR. On balance, we remain constructive on IEL at current levels and look to further detail regarding IEL's IELTS strategy at the FY23 result in August. Reiterate Buy.
