Critical Analysis: Strategic Education (NASDAQ:STRA) vs. ADT (NYSE:ADT)

Strategic Education (NASDAQ:STRA) and ADT (NYSE:ADT) are both consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, risk, earnings, profitability, valuation, dividends and institutional ownership.

Insider & Institutional Ownership

93.3% of Strategic Education shares are owned by institutional investors. Comparatively, 87.2% of ADT shares are owned by institutional investors. 3.6% of Strategic Education shares are owned by insiders. Comparatively, 3.0% of ADT shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and target prices for Strategic Education and ADT, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Strategic Education	0	3	2	0	2.40
ADT	1	4	2	0	2.14

Strategic Education presently has a consensus price target of $96.67, indicating a potential upside of 33.20%. ADT has a consensus price target of $8.13, indicating a potential downside of 17.50%. Given Strategic Education’s stronger consensus rating and higher probable upside, equities analysts plainly believe Strategic Education is more favorable than ADT.

Profitability

This table compares Strategic Education and ADT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Strategic Education	10.46%	8.98%	7.11%
ADT	11.85%	18.99%	4.40%

Risk and Volatility

Strategic Education has a beta of 0.47, suggesting that its stock price is 53% less volatile than the S&P 500. Comparatively, ADT has a beta of 1.04, suggesting that its stock price is 4% more volatile than the S&P 500.

Valuation and Earnings

This table compares Strategic Education and ADT”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Strategic Education	$1.27 billion	1.27	$126.61 million	$6.00	12.09
ADT	$5.13 billion	1.40	$595.95 million	$0.71	13.88

ADT has higher revenue and earnings than Strategic Education. Strategic Education is trading at a lower price-to-earnings ratio than ADT, indicating that it is currently the more affordable of the two stocks.

Dividends

Strategic Education pays an annual dividend of $2.40 per share and has a dividend yield of 3.3%. ADT pays an annual dividend of $0.22 per share and has a dividend yield of 2.2%. Strategic Education pays out 40.0% of its earnings in the form of a dividend. ADT pays out 31.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. ADT has increased its dividend for 1 consecutive years.

About Strategic Education

Strategic Education, Inc., through its subsidiaries, provides education services through campus-based and online post-secondary education, and programs to develop job-ready skills. The company operates through U.S. Higher Education, Australia/New Zealand, and Education Technology Services segments. It operates Strayer University that offers undergraduate and graduate degree programs in business, criminal justice, education, health services, information technology, and public administration at physical campuses located in the eastern United States, as well as through online; non-degree web and mobile application development courses through Hackbright Academy and Devmountain; and MBA online through its Jack Welch Management Institute. In addition, the company operates Capella University that provides post-secondary education; Torrens University, which offers undergraduate, graduate, higher degree by research, and specialized degree courses primarily in business, design and creative technology, health, hospitality, and education fields through online and on physical campuses located in Australia; Think Education, a vocational training organization; and Media Design School, which provides industry-endorsed courses in 3D animation and visual effects, game art and programming, graphic and motion design, digital media artificial intelligence, and creative advertising in New Zealand. It also offers Workforce Edge, a platform to employers that provides education benefits administration solutions; and Sophia Learning, which enables lower cost education benefits programs. Strategic Education, Inc. was founded in 1892 and is headquartered in Herndon, Virginia.

About ADT

ADT Inc. provides security, interactive, and smart home solutions to residential and small business customers in the United States. It operates through two segments, Consumer and Small Business, and Solar. The company provides burglar and life safety alarms, smart security cameras, smart home automation systems, and video surveillance systems. It primarily offers security designed to detect intrusion, control access, sense movement, smoke, fire, carbon monoxide, flooding, temperature, and other environmental conditions and hazards; and address personal medical emergencies, such as injuries or unanticipated falls. The company also provides automation and smart home solutions that allow customers to use their smart phones, smart phone application, or touchscreen panels in their homes to arm and disarm their security systems; record and view real-time video; and creates customized and automated schedules for connected devices; programs systems to react to defined events; integrates system with third-party connected devices, such as cameras, lights, thermostats, appliances, and garage doors, as well as offers monitoring and maintenance services. In addition, the company offers energy storage solutions, energy efficiency upgrades, and roofing services. It offers its products under the ADT, ADT Pulse, ADT+, and ADT Commercial brand names. The company was formerly known as Prime Security Services Parent, Inc. and changed its name to ADT Inc. in September 2017. ADT Inc. was founded in 1874 and is headquartered in Boca Raton, Florida.