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Pluralsight: Extensive Online Learning Content Provides Tailwinds

May 08, 2020 12:12 PM ETPluralsight, Inc. (PS)
Stefan Ong profile picture
Stefan Ong
900 Followers

Summary

  • Pluralsight has experienced steady growth in recent years, mainly from growth in business customers.
  • User engagement has led to strong retention rates.
  • Pluralsight appears to be cheap compared to its peers.

Pluralsight's (NASDAQ:NASDAQ:PS) has underperformed the S&P in the past year, returning almost -50% compared to the S&P's -2.6%. This is mainly attributed to the company understating losses from stock-based compensation. However, the company says the mistakes were found to be unintentional and not the result of fraud. With an extensive online course library, Pluralsight has managed to attract business customers to its platform. Its liquidity position is strong and relative pricing looks cheap compared to its peers.

(Source: Seeking Alpha Data)

Pluralsight has a growing market with decent growth

Revenue for Pluralsight has grown from $131M in 2016 to $317M in fiscal 2019, compounding at 34% year on year. Revenue growth has increased from 26% in 2017 to 36% in 2019. To drive growth and market penetration, Pluralsight can increase their overall customer base, accelerate expansion within existing customers, and pursue international expansion when appropriate. The company has a track record of pivoting successfully to online education and a focus on enterprises, which provides a positive outlook for the company.

(Source: Investor Presentation)

Pluralsight estimates its total addressable market its businesses at $42B in 2019, which is expected to grow to more than $300B in 2025. Based on revenues of $317M, Pluralsight's market penetration is only 0.7%. The growth in the addressable market is mainly driven by the technology skills gap in the market. As technology changes rapidly, software developers have to re-train constantly. This need to retrain would lead to an increase in demand for the technology training market.

(Source: Investor Presentation)

In the online education space, it is difficult to convert free users to high paying ones. However, Pluralsight managed to capture business customers, which are the highest spending user in the space. The company's ability to integrate and personalize skill assessments, course library, learning paths and analytics have provided a source of continuous technology

This article was written by

Stefan Ong profile picture
900 Followers
Focused on buying high-quality businesses and holding them for the long term. My initial investment strategy was to buy dividend-yielding stocks and REITs to generate passive income. This changed recently as I have more time to study companies. Besides, finding businesses that can reinvest earnings and compound returns at a higher rate is much more rewarding.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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