Perdoceo Education (PRDO) finished 2022 in style. Indeed, while Q4 results released by the company last night showed student enrollments at its American InterContinental University System (AIUS) were still down 10.8% from a year earlier due to the previously communicated COVID-related dynamics and adjustments made to PRDO’s marketing process, its Colorado Technical University (CTU) enjoyed its second consecutive quarter of growth with enrollments up 2.0% aided by its corporate partnership program. As a result, overall enrollments for the company were down just 3.0% (following the much steeper drops it experienced in the first half of 2022). And including learners participating in non-degree seeking and professional development programs or degree seeking, non-Title IV, self-paced programs, enrollments would have been down even less.

This better-than-anticipated student retention and engagement helped drive a 10.2% rise in revenue for the period to $176.2 million, which handily beat the $164.8 million analyst forecast. And with PRDO also continuing to do an excellent job enhancing operating efficiencies in admissions and marketing, adjusted earnings fell by a less-than-expected 22.5% to 31 cents per share and exceeded the top end of the company’s guidance of 27-30 cents despite also having to absorb certain non-recurring investments its academic institutions made in human capital, marketing and other operating processes during the quarter.

What’s more, this solid operating performance also allowed the company to produce another $37 million in free cash flow during Q4. Thus, even after spending roughly $45 million in December 2022 to purchase Coding Dojo, an education technology company providing upskilling and reskilling opportunities in technology and various computer programming languages, PRDO’s cash balance fell by just $7 million to $518 million. And with the company remaining debt-free, this massive cash pile translates into $7.57 in net cash per share or about 56% of its current share value.

More importantly, with PRDO’s new marketing strategies to further improve its focus on identifying prospective students who are more likely to succeed at one of its two universities—which have led to the continuation of the steady marginal improvements in student engagement that began in Q4 of 2021—now being fully annualized, the company sees further gains in student retention and engagement ahead. As a result, it thinks it can earn 55-57 cents per share in Q1, which suggests growth of 10-14% from the prior year. And given that the stock still trades at less than 9 times even the low end of the $1.63-1.85 in adjusted earnings per share PRDO expects for all of 2023, the midpoint of which also indicates solid year-over-year growth of 7%, I think today’s muted response to this news is due to the overall market weakness and fully expect the stock to resume its recent upward trend in short order.