This stock is up 400% year-to-date ... and it might still be "cheap"

I'm on a mission to explore some of the ASX's most intriguing small caps, breaking down the key insights and numbers that matter. Today, we're taking a look at EDU Holdings.

EDU Holdings (ASX: EDU) is a name you've probably never heard of. As a tertiary education business, it might even spook you, given what's happened to a large cap name like IDP Education. However, the numbers tell a different story.

The company operates the Learning Group and Ikon Institute, delivering vocational and higher education to domestic and international students. EDU has a market cap of $80 million, though its shares are up 455% year-to-date, underpinned by a massive uplift in earnings.

Massive growth and more to come

EDU's latest first-half 2025 earnings and full-year guidance present a rather intriguing valuation. Key highlights from the results (reported 27 August) include:

• Revenue up 114% to $36.1 million, reflecting 163% growth from Ikon and 36% growth from Learning Group

• EBITDA up 373% to $10.9 million

• Gross margin up 600 bps to 61%, driven by scale benefits and optimised class sizes

• Statutory NPAT of $6.3 million (vs. $28,000 a year ago)

• Net cash of $21.2 million (vs. $5.0 million at 31-Dec-24), reflecting strong Ikon enrolments and upfront fee collection

• Maiden interim dividend of 1 cent per share

Source: EDU Education first-half 2025 results presentation

Some other interesting takeaways include:

• International students now represent 84% of Ikon enrolments versus 68% in the prior year

• Ongoing shift to online delivery for Ikon domestic enrolments, with 75% in term two 2025, up from 66% a year ago

• Australian Learning Group seeing a decline in enrolments term-on-term, reflecting "softer market conditions and regulatory headwinds"

• Despite the company's size and one of its first meaningful profit outcomes, it opted to pay a 1 cent dividend (approx ~1.9% yield)

• On 9 September, the company's Non-Executive Director purchased 555,000 shares ($299,700) at 54 cents

Regulatory uncertainty remains

The international education sector faces significant headwinds that EDU must navigate. The company flagged the following risks in its earnings presentation:

2026 constraints loom large. The government has capped new overseas student commencements at 295,000, with growth exclusively allocated to higher education and public universities. Ikon and ALG face restrictive provider-specific limits of 205 and 471 respectively, also limiting their access to priority visa processing.

Visa settings are tightening. Higher fees, increased application scrutiny, and reduced eligibility criteria are already impacting offshore visa grants and approval rates, particularly in the vocational education sector. A new Ministerial Direction for 2026 may introduce further restrictions.

Full-year guidance

Despite regulatory uncertainty, EDU expects second-half EBITDA and net profit to match the first half, implying full-year EBITDA of approximately $21.8 million and NPAT of $12.6 million.

At an $80 million market cap, this translates to a forward price-to-earnings of 6.3x, or an enterprise value-to-NPAT of approximately 4.5x after accounting for $21.2 million in net cash.

The bottom line: EDU's first-half represents a genuine step-change, transitioning from marginal profitability to meaningful earnings and a maiden dividend. While the regulatory environment remains challenging, the valuation appears undemanding for a business that's starting to generate cash and demonstrate operational leverage.