Online learning has come off age. With two major companies getting listed in the market i.e Coursera (NYSE:COUR) first and then Udemy (Nasdaq:UDMY), it is now widely accepted that online learning is here to stay. Both of them had somewhat different listing story to tell. Lets see some statistics here:
Of course, its very interesting to see how different the listing day and overall stock price movement since then. Clearly, Udemy has done better in trading compared to Coursera. But will this sustain?
Beyond the short term trading data, what is important to look at is the long term potential of each of the company from a financial analysis perspective. Long term investors would look at the potential cash flows each business can generate and decide accordingly which stock would be better to hold currently.
Lets compare the financials on each metric:
Udemy is clearly a bigger company in terms of revenue at an annualized FY 2021 run rate of ~USD 500mn. Coursera on the other hand is a tad lower than Udemy at FY 2021 potential revenue of USD 400 mn. While both companies grew aggressively in FY 2020 given the pandemic that happened for most part of the year, Udemy’s revenue has definitely slowed down in FY 2021. Coursera on the other hand has grown faster than Udemy in FY 2021 which gives it a big upper hand for future revenue potential of the two companies.
Cost of revenues relates to the fees that these platforms need to pay to the educational partners and instructors as well as the expenses associated with the operations of the platform. Coursera has done better than Udemy by a few percentage point every year on this metric. In 2021, Coursera’s cost of sales is 41% of revenues while Udemy’s is slightly higher at 45% of the revenues of the company.
While in 2019, Coursera was way lower than Udemy in terms of its sales and marketing spend, Udemy has done well to reduce it gradually over time. Now, both Coursera and Udemy has sales and marketing expense at 41% & 42% respectively of its total revenues.
On the R&D front, Udemy’s expenses are way below Coursera all throughout. In 2021, while Coursera’s R&D expense as % of revenues was very high at 32%, Udemy’s was significantly lower at 12%. While R&D expense helps to build long term innovation in this segment, yet there is a huge difference between the two companies on this front.
General and administrative expenses consist primarily of personnel and personnel-related costs, including stock-based compensation and costs related to legal, finance, and human resources departments, as well as indirect taxes, professional fees, and other corporate expenses. On this front as well, Udemy is doing better than Courser in FY 2021. While for Coursera, G&A as a % of revenues is 18%, for Udemy it is lower than that at 12%. So Udemy scores on this front as well.
Interestingly, both Coursera and Udemy have negative profitability margins currently. While given the high R&D expenses, Coursera’s FY 21 operating profit margins (EBIT %) is at -32% and Udemy is significantly better than that -11%. So there is a huge differential there in terms of the margins between the two companies. Udemy is a clear winner although both are at negative margins given their cost structure. Another point here is to note that while Udemy has improved its margins gradually from FY 2019 to FY 2021, Coursera’s margins have in fact eroded over time.
Based on the discussion above, if we have to give a scorecard on the financial parameters to the two companies, we would conclude Udemy is a winner in more metrics than Coursera.
Udemy is ahead of Coursera on absolute revenues and profitability margins while Coursera had shown a higher revenue growth in 2021 as compared to Udemy. Based on this analysis, we would conclude Udemy has a better financial performance as compared to Coursera based on current data.
Based on current trading value, Coursera is valued at USD 4.57 bn while Udemy is slightly lower at USD 4.26 bn. At this price, the implied Price to Sales valuation metric for Coursera is higher at 11.4x than Udemy at 8.5x. Clearly, Udemy’s valuation is almost 30% lower compared to Coursera currently.
Finally, we can conclude that given the lower valuation and better financial performance of Udemy vs Coursera, Udemy is currently a better stock to own than Coursera. However, we still have to put a disclaimer that our analysis is purely for educational purposes and is not meant to be used for your individual trading or investing recommendation. We do not recommend you to take any position based on the above analysis.