Product and Service
Companies included in online education system & software sector in education industry are primarily providers of technology-based educational system and software for public schools’ management, academic support, curriculum, and other service.
Demand for Product and Service
As our revenue data indicates, demand for technology-based education management system and service of companies in this sector has been strong and growing in a long run but presented fluctuation depending on a couple of factors.
The Sector
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Demand for technology-based education management system and service is strong and the growth is supposed to continue under recent trend of education standard.
- Enrollment of school fluctuated and had presented a downward trend before 2015 and 2017 with sales mix shifting to high school students. However, it may be rebounding in 2018 in terms of enrollment.
- There is an increasing trend in funding of student.
- Demand for traditional instructional materials and solution grows more slowly than that for new and technology based materials and solution.
Causes behind the trend
- Demographic trends and spending of local government/education district, which depends heavily on economy cycle, work together to determine the demand for products of companies in this industry.
- Favourable demographic trend as presented in population growth forms a base for this industry in a long run. However, the fluctuated enrollment of school districts determines performance of companies in short term. As economy recovery speeds, the student funding has increased.
Industry Future
There is a reason to believe that revenue will continue to grow for companies in this sector, especially for those able to provide innovative education solutions of technology.
Numbers
General Financial Performance of Companies In the Sector
There are many uncertainties in school enrollments and mix of enrollment among school districts. It seemed that, while the growth in enrollment of schools had been positive, it generally presented a downward trend between 2015 and 2017 as indicated by some of typical companies’ data. And during the same period of time the revenue of companies has been significantly impacted by the deceasing enrollment while increased funding of education partially offset the decrease in enrollment. However, things seem to have changed in 2018 as indicated by large increase in enrollment of schools and revenue based on some typical company’s data.
We saw an improved gross margin (36%) for a typical company who focus mainly on public school management system and services. The typical SG&A as percentage of sales of companies in this sector is around 32% and, correspondingly, the typical operating margin is around 3%.
According to our analysis, the typical companies’ enterprise price/cash flow ratio is about 42 with a debt/asset ratio of 0%.
