fbpx

Tax Law Changes Benefit Bright Horizons

Stock (Symbol)

Bright Horizons Family Solutions (BFAM)

Stock Price

$95

Sector
Food & Necessities
Data is as of
January 4, 2018
Expected to Report
Feb 7
Company Description
brighthorizonsBright Horizons Family Solutions Inc. is a provider of child care, early education and other services. The Company provides services under multi-year contracts with employers offering child care and other dependent care solutions. The Company’s segments include full service center-based care services, back-up dependent care services and other educational advisory services. The Company has over 1,000 client relationships with employers across an array of industries. Source: Thomson Financial
Sharek’s Take
David SharekThe new plan takes the deductable for childcare from $1000 to $2000, and has Bright Horizons Family Solutions (BFAM) stock climbing higher. Bright Horizons is a provider of on-site employer sponsored childcare. It has long-term contracts with blue chip companies that co-fund the capital investment, then provide 20% of the childcare costs, with 80% being paid out-of-pocket by the employee. Bright Horizons has 1000 clients with the capacity to serve 100,000 children. Clients include JPMorgan Chase, IBM, Cisco and Johnson & Johnson. Last qtr the company added client centers for General Mills, Overstock and Fox Entertainment. BFAM also has more retail locations called consortiums, which are centrally located centers that support multiple companies (there’s one in Columbus Circle). Primarily located in the US, Bright Horizons recently expanded into Canada, UK, Ireland, the Netherlands and India, but the UK operations had been a pull on profit growth due to currency exchange rates. Tuition prices range from $17,000 (pre-school) to $30000 (infant care) per year. Teachers make $10 – $20 an hr. BFAM has also gotten into into elder care/senior care which has better profit margins, thus profits grow faster than sales. BFAM is a solid stock , but the P/E is always higher than the growth rate. Unfortunately I have been watching the stock for more than a year and haven’t bought in (as it’s gone from $70 to $95).  I’m trying to get the stock on a dip. BFAM is $95 and my 2018 Fair Value is $93. My Fair Value is a P/E of 31, which I feel is generous for a childcare center. But I’ve been wrong on this stock for more than a year so what do I kn0w?
One Year Chart
Profit growth was great last qrt, 27%, but I think this company is growing around 20%. Sales grew 13% and the company beat the street by just a penny. 2017 profit estimates also increased a penny. Qtrly Estimates are for 23%, 15%, 7% and 13% profit growth the next 4 qtrs. The Est. LTG is just 18% a year.
Fair Value
Bright Horizons originally went public in 1997, then went private in 2008, struggled through the financial crisis, and went public once again in 2013. I don’t see a great growth opportunity here with the shares this high.
Bottom Line
Bright Horizons Family Solutions has a good business model that helps it thrive when the economy is good as that means more hiring in the laborforce. The economy is strong, thus BFAM is benefiting. And the new tax break should bring in even more business. But this stock has little upside to my Fair Values and is extended on the ten-year chart. BFAM remains on the radar, but I’ve missed this latest run so what do I know?
Power Rankings
Growth Stock Portfolio

N/A

Aggressive Growth Portfolio

N/A

Conservative Stock Portfolio

N/A

Not a member? Sign up here for $25 a month.