Stock (Symbol) |
Bright Horizons Family Solutions (BFAM) |
Stock Price |
$69 |
Sector |
| Food & Necessities |
Data is as of |
| March 13, 2017 |
Expected to Report |
| May 1 – 5 |
Company Description |
 Bright 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. Full service center-based care segment includes center-based child care, preschool and elementary education. Back-up dependent care segment includes center-based back-up child care, in-home well child care, in home mildly ill child care and adult/elder care. Its other business services are included in the other educational advisory services segment, which includes its college preparation and admissions advisory services as well as tuition reimbursement administration and educational advising services. The Company has over 1,000 client relationships with employers across an array of industries. Source: Thomson Financial |
Sharek’s Take |
 A strong labor market is a good environment for Bright Horizons Family Solutions (BFAM), a provider of on-site employer sponsored childcare. Bright Horizons 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. The company has been in business 30 years and has grown 30% through acquisition. It 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. It’s also gotten into into elder care/senior care which has better profit margins, thus profits grow faster than sales. Tuition prices range from $17,000 (pre-school) to $30000 (infant care) per year. Teachers make $10 – $20 an hr. The company estimates revenue growth in the 8-10% range and profit growth in the 15-20% range, which makes BFAM a fit for the Growth Portfolio. My only issue is the stock has a P/E of 27, which I feel is a premium price for this high-teens grower. I am waiting patiently for the opportunity to buy BFAM on a pullback. |
One Year Chart |
 This company is affected by currency fluctuation. Revenue increased 7% last qtr, but that would have been 10% if it not for the F/X headwind with its UK operations. Profit growth was 19% last qtr, which beat the 17% estimate, but it would have been north of 20% without F/X. When I see this chart I have to believe $65 is a goo wish price to buy in at. And with many of the numbers in this chart in black instead of green, perhaps we might get our chance. Profit Estimates for the next 4 qtrs are 10%, 18%, 22% and 18%. |
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. Trump and his daughter Ivanka are focusing on providing a $5000 tax deduction for childcare, and that serves as a positive backdrop. Thus my Fair Value is 28x earnings, or $71 per share. |
Bottom Line |
 Bright Horizons Family Solutions has risen steadily since its recent IPO. But recently the stock has lost momentum as profit growth has slowed into the high-teens. The big picture here is childcare centers depend on a solid economy so that profits flow as expected. Since the economy is good right now, the stock is flying higher. But keep in mind this industry doesn’t have great consistency, thus even though the economy is good right now I am hesitant to buy high. BFAM is on my radar for the Growth Portfolio, and I would like to see the stock at $65. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
