Nido Education Limited (ASX: NDO) 

NDO, an Australian company, specializes in owning, operating, and managing long-term early childhood education and care services. It provides a nurturing, secure, and serene environment for children from six weeks old up to school age. The company operates under the Nido Early School brand, delivering high-quality education and care.

Recommendation Rationale - SELL at AUD 0.900 

• Employee Costs Jump: NDO’s witnessed a turnaround in FY24, with its bottom-line turning positive supported by 74% annual jump in revenue. However, its employee costs surged by ~35% year-on-year to AUD 103.6mn in FY24.
• Technical Observation: NDO shares have crossed their R2 as mentioned in the report dated 6 January 2025. Its 14-day Relative Strength Index (RSI) at ~72.24 indicates the stock is in overbought zone and may witness retracement soon.
• Overvalued Multiples: On a forward 12-month basis, NDO’s trading multiples such as EV/EBITDA, Price/Earnings Per Share, Price/Cash Flow and Price/Book Value are higher than the industry (Personal & Household Products & Services) median.
• Risks: NDO operates in the early childhood education sector, which involves strict adherence to regulatory standards. Non-compliance could lead to penalties or reputational damage.

NDO Daily Price Chart

Valuation Methodology: EV/Sales Approach (FY December'25E) (Illustrative)

NDO is expected to trade at a slight premium to its peers considering the 74% annual jump in FY24 revenue, turnaround in bottom-line and improvement in EBITDA margin. For conducting valuation, the following peers have been considered: Funeral Partners Ltd (ASX: PFP), 3P Learning Ltd (ASX: 3PL), Shine Justice Ltd (ASX: SHJ), and others were considered.

Considering that the stock is has crossed its R2, the recent rally in share price, current trading level, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing market price of AUD 0.900, up ~1.12% as of 5 March 2025.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 5 March 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.