BFAM Stock Study (10-11-25)

Posted by Mark on November 26, 2024 at 06:50 | Last modified: October 11, 2025 10:45

I recently did a stock study on Bright Horizons Family Solutions (BFAM) with a closing price of $97.58.

M* writes:

     > Bright Horizons Family Solutions Inc provider of [sic] early education and
     > child care, family care solutions, and workforce education services that help
     > working families and client employees personally and professionally. It
     > provides services under multi-year contracts with employers that offer
     > early education and child care, back-up care, and educational advisory
     > services as part of their employee benefits package. The company has three
     > business segments; full-service center-based child care, backup care, and
     > educational advisory services. The majority of the revenue is generated
     > by full-service center-based child care, which includes traditional center-
     > based child care and early education services. Other services provided
     > by the company include in-home child and elder care, and Others.

Over the past 10 years, this medium-size company has grown sales and earnings at annualized rates of 5.4% and -2.8%, respectively. Lines are up, mostly straight, and parallel since ’20 but a huge COVID-related decline makes for the negative long-term growth rate [I actually don’t think it’s negative because $1.50/share * (1.0536 ^ 9) = $2.40/share from ’15 to ’24 corresponding to a +5.4% annualized growth rate]. 2020 aside, only ’23 shows [EPS] decline. Five- (10-) year EPS R^2 is 0.82 (0.02) and Value Line (VL) gives an Earnings Predictability score of 55.

Over the past decade, PTPM trails peer and industry averages while decreasing from 9.6% (’15) to 7.4% (’24) with a last-5-year mean of 4.8%. ROE leads peer and industry averages despite falling from 12.6% (’15) to 9.9% (’24) with a last-5-year mean of 6.4%. Debt-to-Capital is less than peer and industry averages while ranging from 56.3% (’15) to 65.1% (’19) with a last-5-year mean of 60.5%.

Quick Ratio is 0.45 and Interest Coverage is 6.5 per M* who gives a Financial Health grade of B (per BI website). and assigns a “Narrow” (quantitative) Economic Moat. VL grades the company B+ for Financial Strength.

With regard to sales growth:

• YF projects YOY 8.3% and 7.0% for ’25 and ’26, respectively (based on 7 analysts).
• Zacks projects YOY 8.3% and 7.2% for ’25 and ’26, respectively (2 analysts).
• VL projects 6.9% annualized growth from ’24-’29.
• CFRA gives ACE of 8.3% YOY and 7.6% per year for ’25 and ’24-’26, respectively (7).
• M* provides 2-year annualized ACE of 7.5%.

My 6.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 17.2% and 16.0% per year for ’24-’26 and ’24-’27, respectively (based on 9 analysts).
• Nasdaq.com projects 17.1% YOY and 16.0% per year for ’26 and ’25-’27 (3 analysts each for ’25, ’26, and ’27).
• Finviz projects 5-year annualized growth of 17.5% (2).
• LSEG projects LTG of 17.8%.
• SERR [cites Refinitiv] projects 4-year annualized growth of 17.8% (1).
• YF projects YOY 22.5% and 15.3% for ’25 and ’26, respectively (8).
• Zacks projects YOY 23.3% and 15.7% for ’25 and ’26, respectively (3).
• VL projects 13.7% annualized growth from ’24-’29.
• CFRA provides ACE of 77.1% YOY and 43.2% per year for ’25 and ’24-’26, respectively (8).*

My 12.0% forecast is below the long-term-estimate range (mean of four: 16.7%). I will use ’24 EPS of $2.40/share as the initial value rather than 2025 Q2 $3.05 (annualized).

My Forecast High P/E is 36.0. Over the past 10 years, high P/E increases from 46.1 (’15) to 59.1 (’24) with a last-5-year mean of 99.3 (excluding 394 in ’20) and last-5-year-mean average P/E of 77.8 (also excluding 143 low P/E in ’20). I am below the range.

My Forecast Low P/E is 32.0. Over the past 10 years, low P/E increases from 29.2 (’15) to 38.2 (’24) with a last-5-year-mean of 56.4. I am forecasting toward bottom of the range [only ’15 and ’17 (25.1) are less].

My Low Stock Price Forecast of $76.80 is default based on initial value from above. This is 21.3% less than the previous close and 19.6% less than the 52-week low.

These inputs land BFAM in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 9.3%.

PAR (using Forecast Average—not High—P/E) of 8.1% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I usually compare my inputs with those of Member Sentiment (MS) but mine is the only study showing up on the BI website.

With regard to VL, I am more conservative. VL projects a future average annual P/E of 32.0 versus my 34.0 and high EPS of $6.60/share versus my $4.23. This contributes to a forecast high price of $255/share versus ~$152 for me.

With regard to valuation, PEG is 3.7 and 2.4 per M* and my projected P/E, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is fire-sale low at 0.32 [but suspect because I can’t completely rationalize the seemingly inflated values after ’20 that may be slowly coming back to earth].

MOS is at least moderate in the current study because my inputs are near or less than respective analyst/historical ranges. Without MS weighing in, I am reticent to pronounce this “robust.”

I can’t overlook an argument to say visual inspection fails for this company. We allegedly have a negative 10-year EPS growth rate and even though I think that should be positive, only since ’24 has ’15 been exceeded. That’s a long period of apparent stagnation (despite YOY growth in most instances).

Also on the questionable side is financial strength: debt-to-capital >> 33%, Quick Ratio < 1.0, and so-so Interest Coverage.

Per U/D, BFAM is a BUY under $95/share. Given forecast high price of $152.30, the BI TAR criterion [double in five years] is met ~$76 (no dividend).

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* — I can’t explain CFRA’s apparent EPS disconnect in 2025 and beyond.