By Bill Alpert

American healthcare facilities can only fill half their nursing jobs. As the population ages and current nurses themselves retire, the shortage could get worse.

That is why Jefferies analyst Jack Slevin launched coverage Wednesday on Adtalem Global Education, the company that runs the most healthcare professional schools in the country. Even though the stock has doubled in the past year to a recent $105, he says there's almost another 30% upside to his target of $135.

"It's the best way to play the long term structural supply deficit in healthcare labor," Slevin writes.

Adtalem has beaten estimates for quarterly earnings for nearly two years running, the analyst points out. About two-thirds of its operating earnings become free cash flow, and it applies that cash to buy back stock. And yet, trading at 17 times this year's earnings, Adtalem stock doesn't seem widely appreciated.

Formerly known as DeVry, Adtalem began shedding most of its non-healthcare education units in 2017. Now, it has two dozen Chamberlain University campuses that focus on nursing education, and the online Walden University whose programs offer postgraduate degrees to healthcare and social work professionals. Three schools in the Caribbean train doctors and veterinarians.

Slevin forecasts low to mid-teens annual growth in Adtalem's earnings per share, driven by steady growth in nursing jobs. His supply and demand model for healthcare workers convinces him that the nursing shortage will get worse over the rest of the decade. Some 40% of nurses working today are over the age of 50. Demand for nurses will rise, but there won't be enough nursing graduates to fill vacancies.

Tuition at for-profit schools like Adtalem is cheaper than private universities and more expensive than public universities. The U.S. Department of Education kept a tight leash on the industry under Democratic administrations. As the Trump administration dismantles that agency, operators like Adtalem may find it easier to expand.

In any case, Adtalem's focus on nursing and healthcare distinguishes it from other trade schools. Chamberlain students have high pass rates on nursing license exams, notes the Jefferies analyst, and the graduates have lower default rates on their student loans.

Slevin sees significant earnings upside, driven by the structural shortage in nurses and a compelling stock valuation.

Write to Bill Alpert at william.alpert@barrons.com

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April 23, 2025 18:16 ET (22:16 GMT)

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