G8 Education – Hot or Not?

What is your current view on G8 Education (GEM)?
It is trading near some analysts calculation of fair value, but I am concerned that another profit downgrade will send the price tumbling again.

Are there many barriers to enter into the childcare business?

If an oversupply of childcare places has been caused because of low barriers to entry into the industry then I suppose this situation could go on for some time, and it may be time to exit!

Thanks.

A: Thanks for the question.

I stopped following G8 Education (ASX Code GEM) some time ago.

According to FN Arena, the analysts remain positive on the stock, seeing it as undervalued. Of the major brokers, there are two buy recommendations and two neutral recommendation. The consensus target price is $4.13 compared to the last market price of $3.44.

Barriers to entry are not that high, and regulatory risk is an issue. If you haven’t done so, look at their trading update on 4 December that triggered the most recent plunge in their shade price.


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