Phoenix Education Partners, Inc. (PXED) stock intrinsic value fair value estimate & owner earnings analysis

Phoenix Education Partners owns the University of Phoenix, an online university serving working adults. Nearly all revenue is tuition, and about 88.6% of the University's cash-basis revenue in fiscal 2025 came from federal student-aid programs (up from 88.3% in fiscal 2024). The company went public in October 2025, but only existing shareholders sold shares, so it received no IPO proceeds. Earnings power. We measure owner earnings as operating cash flow, less swings in working capital, less stock compensation, less the capital spending needed just to stay in business. Only two fiscal years (2024 and 2025) are available, so the anchor rests on a short record: $3.80 per share in fiscal 2024 and $4.43 in fiscal 2025, a mid-point of about $4.12. Two adjustments were needed. First, we removed a one-time swing in student deposits (cash that fell from $83.8 million to $11.0 million in 2025 after the University changed how it disburses financial aid), which would otherwise have distorted cash flow. Second, we counted the provision for uncollectible tuition together with the growth in receivables, since they offset each other. The raw average overstates what a shareholder should expect, for reasons visible in the filings. (1) Stock compensation was only $2.6 million in fiscal 2025 but was $47.6 million in the first nine months of fiscal 2026 after the IPO, and $8.5 million in the latest quarter alone; we use roughly $34 million a year, about $0.77 per share more than the average of the two years. (2) Cash taxes were far below book taxes because of deferred-tax benefits ($36.2 million in fiscal 2025); those fell to $6.9 million in the first nine months of fiscal 2026 as the benefit ran down, worth about $0.52 per share. (3) Offsetting both, the two years included about $26 million a year of IPO, sale-process and sponsor-related costs and lease-exit charges that should not recur (about $0.51 per share after tax). The result is a starting point of about $3.35 per share. Growth check. Owner earnings per share grew about 17% in fiscal 2025 ($4.43 versus $3.80), and revenue grew 6.0%. But revenue in the first nine months of fiscal 2026 was $756.3 million versus $749.8 million a year earlier (up 0.9%), and the latest quarter was flat ($271.8 million versus $271.7 million). Because that pace has stalled, the base case assumes zero growth from year one rather than continuing the fiscal 2025 rate. We credit no enrollment growth, no new programs and no margin gains, since none is contracted or demonstrated over multiple years. Base case, about $38 per share. Earnings hold flat at about $3.35 per share for 15 years, then fade to zero over the following 10 years. The flat period rests on the University's established online business and its current Title IV eligibility (financial responsibility composite score of 2.6 for fiscal 2025); the fade reflects that nothing we can evidence guarantees earnings beyond that horizon. Bear case, about $20 per share. The University stays below the 90% federal-aid limit but with little room, competition from traditional universities' online programs (which the filing names as a growing threat to working-adult programs) holds revenue flat while marketing and payroll costs keep rising, and earnings start at about $2.65 per share (the fiscal 2025 level after realistic stock compensation and cash taxes, without the cost savings the base case counts) and shrink 6% a year for 20 years. A breach of the 90% limit, which would risk the University's federal-aid eligibility and which the company itself says could make the business unsustainable, is not modeled as a total loss because it has stayed under the limit in both years reported; it is the main risk beyond this case. Bull case, about $49 per share. Earnings start near $3.90 per share, roughly the level implied by the latest quarter after stock compensation, and grow 2% a year for ten years (well below fiscal 2025's 6% revenue growth), then hold flat for five years before fading over ten. No cash or debt adjustment is made: the company had cash and marketable securities on its balance sheet, and its owner earnings already reflect interest paid and received. What could make this wrong: a breach of the 90/10 limit or other federal-aid rule change; revenue that starts declining rather than staying flat; or stock compensation and cash taxes running higher than the amounts assumed here. Upside would come from renewed enrollment growth, which we have not credited because the last three quarters show none. Two years of history is a short record, and we could not verify results before fiscal 2024. The margin-of-safety price is about $20 per share, roughly the bear-case value and about half of the base case, given the regulatory dependence, the limited financial history and the flat recent trend.