AFYA Stock Study (11-19-25)

Posted by Mark on April 15, 2025 at 07:08 | Last modified: November 19, 2025 10:40

I recently did a stock study on Afya Ltd. (AFYA, $14.77).

M* writes:

     > Afya Ltd is a medical education group based in Brazil. Its education
     > portfolio has several courses in addition to Medicine, such as
     > Management, Dentistry, Law, Engineering, Nursing, Psychology, and
     > Accounting Sciences, among others. It has three segments; Undergrad
     > provides educational services through undergraduate courses related
     > to medical school, undergraduate health science and other ex-health
     > undergraduate programs, Continuing Education provides medical
     > education, specialization and graduate courses in medicine, delivered
     > through digital and in-person content; and Medical practice solution
     > provides clinical decision, clinical management and doctor-patient
     > relationships for physicians and provide access, demand and
     > efficiency for the healthcare players.

Since 2019 when public trading begins, this small-size company grows sales and earnings at annualized rates of 29.0% and 19.5%, respectively. Lines are mostly up, straight, and parallel except for EPS decline in ’21. 5-year EPS R^2 is 0.73. The company is not covered by Value Line.

Since 2019, PTPM leads peer and industry averages despite falling from 24.9% to 20.5% (’24) with a last-5-year mean of 19.5%. ROE leads peer and industry averages while increasing from 9.2% to 17.5% (’24) with a last-5-year mean of 11.7%. Debt-to-Capital is greater than peer and industry averages while increasing from from 14.3% to 42.6% (’24) with a last-5-year mean of 40.5%.

Quick Ratio is 0.95 and Interest Coverage is 2.8 per M* who assigns “Narrow” Economic Moat and gives a B grade for Financial Health (per BI website).

With regard to sales growth:

• YF projects YOY 12.4% and 8.1% for ’25 and ’26, respectively (based on 8 analysts).
• Zacks projects YOY 11.8% and 8.5% for ’25 and ’26, respectively (2 analysts).
• CFRA gives ACE 12.4% YOY and 10.2% per year for ’25 and ’24-’26, respectively.
• M* offers a 2-year ACE of 10.7%/year.

My 7.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 11.0% and 24.0% per year for ’25-’27 and ’25-’28, respectively (based on 9 analysts).†
• Nasdaq.com projects 5.6% YOY and 5.4% per year for ’26 and ’25-’27 (one analyst each for ’25, ’26, and ’27).
• Seeking Alpha projects 4-year annualized growth of 20.4%.
• Finviz gives 5-year ACE of 7.9% (1).
• YF projects YOY 4.8% contraction and 21.2% growth for ’25 and ’26, respectively (1).
• Zacks projects growth of 3.6% and 8.8% for ’25 and ’26 (2), along with 5-year annualized of 20.4%.
• CFRA gives ACE growth of 22.4% YOY and 21.8% per year for ’25 and ’24-’26, respectively (1).

My 8.0% per year forecast is near bottom of the long-term-estimate range (mean of three: 16.2%). Initial value is ’24 EPS of $1.29/share (up 52% YOY) rather than 2025 Q3 $1.40 (TTM).

My Forecast High P/E is 17.0. Since 2019, high P/E decreases from 68.1 to 17.5 (’24) with a last-5-year mean of 36.1 and a last-5-year-mean average P/E of 26.6. I am below the range.

My Forecast Low P/E is 9.0. Since 2019, low P/E falls from 41.6 to 11.3 (’24) with a last-5-year mean of 17.1. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $11.60 is default based on initial value given above: 21.5% less than the previous close and 14.1% less than the 52-week low.

These inputs land AFYA in the BUY zone with a U/D ratio of 6.4. Total Annualized Return (TAR) is 18.7%.

PAR (using Forecast Average–not High–P/E) of 12.5% is less than I seek in a small-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 8 studies (my study and 4 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.2%, 11.0%, 20.3, and 11.0, respectively. I am lower across the board (although MS sample is too small for statistically meaningful comparison).

MS high / low EPS are $2.23/ $1.29 versus my $2.05 / $1.29 (per share). My high EPS is less due to a lower growth rate.

MS LSPF of $11.20 implies Forecast Low P/E of 8.7: less than the above-stated 11.0. MS LSPF is 21.1% less than the default $1.29/share * 11.0 = $14.19 resulting in more conservative zoning. MS LSPF is also 3.5% less than mine.

MOS is robust because my inputs are near or below respective analyst/historical ranges (especially EPS growth rate). Also suggestive of MOS are my inputs being lower than MS and MS TAR being 6.6%/year greater than mine.

With regard to valuation, PEG is 0.42 and 1.2 per Zacks and my projected P/E, respectively: slightly undervalued (0.55 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is extremely cheap at 0.40.

Couple caveats to this study include scant analyst estimates (along with MS studies) and underwhelming financial strength with regard to liquidity ratios. I do feel MOS to be quite strong in the study with TAR undeterred, however.

Per U/D, AFYA is a BUY under $17.40/share. BI TAR criterion is met at same price [34.8 / ((14.87 / 100 ) +1 ) ^ 5].

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† — 2024 stated EPS omitted that would otherwise inflate to 99% and 87% for ’24-’26 and ’24-’27, respectively.