AFYA LIMITED (AFYA): what the price requires
The current priced-in claim for AFYA LIMITED (AFYA) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/AFYA
Headline
| Field | Value |
|---|---|
| Ticker | AFYA |
| Company | AFYA LIMITED |
| Current price | $14.25/sh |
| Composition | Undergraduate 88% / Continuing education 7% / Medical practice solutions 4% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 9.4% |
| Operating margin today | 32.8% |
| Margin compression implied | -23.4pp |
| Multiple paid | 7x operating income |
The operating-margin requirement is derived from the framework's value band at year 6, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7.2% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | -1.76σ |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.72x | 5 | justifies |
| Earnings | 0.67x | 4 | justifies |
| Relative | 0.52x | 5 | justifies |
| Growth | 0.43x | 3 | justifies |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 10.3%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $80.47 | 0.18x | yes | FCF base $0.3B, growth 21% (input: historical growth), terminal g 4.0%, WACC 10.4%, 6yr projection |
| DCF Exit Multiple | Growth | $33.24 | 0.43x | yes | Exit EV/EBITDA: 5.4x / 7.4x / 9.4x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $27.33 | 0.52x | yes | P/E 14.22x (blended: static sector reference 18x + trailing (TTM) 9x), scenarios: 11.6x / 14.2x / 16.9x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $18.00 | 0.79x | yes | BV/sh $10.60, ROE (TTM) 15.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $23.17 | 0.61x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $16.64 | 0.86x | yes | Rev $0.7B, growth 21% (input: historical growth; tapered), Terminal P/S: 1.4x / 1.8x / 2.1x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $57.10 | 0.25x | yes | EPS $1.63, growth 35% (input: historical EPS growth), PEG=0.24 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $8.23 | 1.73x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.16B × (1−21%) / WACC 10.4% → EPV (no growth) |
| Residual Income | Asset | $23.62 | 0.60x | yes | BV $10.60 + 5yr PV of (ROE (TTM) 15.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $19.73 | 0.72x | yes | √(22.5 × EPS $1.63 × BVPS $10.60) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $26.22 | 0.54x | yes | EBITDA $0.24B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $26.67 | 0.53x | yes | FCF $267.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $52.64 | 0.27x | yes | EPS $1.63 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $13.36 | 1.07x | yes | BV $10.60 × (ROIC 13.0% / WACC 10.4%) |
| P/Sales Sector | Relative | $20.03 | 0.71x | yes | Revenue $0.72B × sector P/S 2.5x |
| PEG Fair Value | Relative | $61.18 | 0.23x | yes | EPS $1.63 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $17.64 | 0.81x | yes | EPS $1.63 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $179.6m |
| Net debt / NOPAT (after-tax) | 0.97x |
| Net debt / operating income (pre-tax) | 0.77x |
| Interest coverage | 2.2x |
| Share count CAGR (buyback) | -0.8% |
| Burning cash | no |
Bullet Takeaways
Afya is the leading medical-education group in Brazil, and its moat is a government-rationed asset: licensed medical-school seats. Undergraduate education is 88% of the mix, and the schools ran 100% full in Q1 2026 with 3,768 operating medical seats, up more than 6% year over year.
The economics are exceptional for an education company. Q1 2026 revenue rose 8.2% to R$1.01 billion at a 50.5% adjusted EBITDA margin, net income reached R$261.8 million, and free cash flow was R$376 million. Management reaffirmed 2026 guidance of up to R$4.1 billion revenue and R$1.8 billion EBITDA.
The balance sheet is conservative: net debt to EBITDA is about 0.7x, down from 0.9x, and Moody's reaffirmed an AAA.br rating. Inverted, the US-listed shares at $14.07 read as paying only about 7x company-wide operating income, low enough that the price sits below what even a 5% annual decline would warrant. The chief risks are regulatory and currency, since seats and tuition depend on Brazilian government policy.
Bull Case
Afya's competitive moat is among the cleanest a company can own: in Brazil, the number of medical-school seats is set by the government, and new authorizations are scarce, slow, and tied to public-health commitments. The filing describes the gate directly, noting the need "to obtain government authorization, particularly with respect to the availability of public hospital beds within Brazil's Unified Health System (SUS) for medical practice" and the "mandatory contribution to the public health infrastructure" required to create new courses (FY2025 20-F, accession 0001292814-26-002013). That regulatory rationing means Afya's existing 3,768 medical seats are a protected, appreciating asset, and demand for them is effectively unlimited: becoming a doctor is one of the most sought-after careers in Brazil, so the schools run full and can raise tuition each year. The returns confirm the moat, with a 50.5% adjusted EBITDA margin in Q1 2026 that almost no for-profit education business elsewhere achieves.
The second pillar is the growth runway from both seats and adjacencies. Afya keeps winning incremental seat authorizations, securing 63 additional seats in Abaetetuba in February 2026 (lifting that campus to 113), among other approvals, and each new seat is high-margin, fully-subscribed revenue for decades. Beyond undergraduate medicine, the company is building a vertically integrated ecosystem around the doctor's career: continuing education (7% of the mix, serving more than 55,000 enrolled students) and medical-practice solutions (4%), digital tools that follow physicians from school through practice. Q1 revenue growth came from higher medicine-course tickets, more non-medical undergraduates, the FUNIC acquisition, and continuing education, a diversified set of drivers on top of the protected core.
The third pillar is the financial quality and the discount the US-listed shares carry. Afya generated R$376 million of free cash flow in the quarter, carries net debt of only about 0.7x EBITDA (improved from 0.9x), and holds an AAA.br rating reaffirmed by Moody's in May 2026. Management reaffirmed full-year guidance of up to R$4.1 billion revenue and R$1.8 billion EBITDA, and is buying back stock under a program that has already executed over half its authorization. Inverted, the price reads as paying only about 7x company-wide operating income, a multiple so low it sits below what even a 5% annual operating-profit decline would warrant. For a high-margin, moat-protected compounder, that is an unusually cheap entry.
Bear Case
The structural risk that should open the bear case is the balance between Afya's regulatory moat and its regulatory dependency, because the same government that rations seats controls the rules that make them valuable. Afya's entire model rests on Brazilian education and health policy: seat authorizations flow from the Ministry of Education and depend on SUS public-hospital capacity, tuition financing interacts with government student-loan programs, and the tax treatment of educational revenue is policy-set. The filing flags the contribution obligations tied to graduation-course revenue and the program-specific rules that govern the business (FY2025 20-F, accession 0001292814-26-002013). A shift in Brazilian policy, toward more seat authorizations for competitors, price controls on medical tuition, or less favorable tax and financing treatment, could erode the scarcity value that underpins the 50%-plus margins. The moat is granted by the state, and what the state grants it can dilute.
The second risk is currency and country exposure, which is invisible in the operating metrics but central to a US-listed holder's return. Afya earns in Brazilian reais and reports in reais, but the ADS trades in dollars, so a weaker real translates strong domestic results into softer dollar outcomes. Brazil carries elevated political and macroeconomic risk, with a history of currency volatility, high real interest rates, and policy swings, and an investor in the US-listed shares bears all of it on top of the operating story. The disconnect in the valuation inputs, healthy reais-based operating income against a small dollar revenue figure, reflects exactly this translation gap, and it means reported dollar growth can lag the underlying business in a weak-real environment.
The third issue is what the asset and earnings-power models imply once the growth assumption is removed, and how much of the price depends on continued expansion. On the reported figures the excess-return and residual-income models land in the low single digits per share, the earnings-power value is near zero, and the ROIC-justified book is well below the price, because the dollar-translated returns on the equity base look modest. The engine's own read is split: the inversion calls the price cheap on a low operating multiple, but the static asset and earnings families say richly valued, with only the growth-DCF reaching the price. That tension means the bull case depends on durable, high-margin compounding continuing, funded by a steady drip of new seat authorizations. If authorizations slow, tuition growth moderates, or attrition rises (a risk the filing names, noting that a decline in students "may adversely affect our results"), the premium the static frames flag would be exposed.
Valuation
Afya is a case where the inversion and the static models point in opposite directions, and reconciling them is the valuation. Inverted, the US-listed price of $14.07 (June 27, 2026) reads as paying only about 7x company-wide operating income, a multiple so low that the price sits below what even a 5% annual operating-profit decline would warrant, a bound rather than a solved point. On that reading the stock is cheap.
The static asset and earnings families disagree, landing well below price, with excess-return and residual-income in the low single digits and earnings-power value near zero. The reason is a data artifact worth naming: Afya's operating income is reported in Brazilian reais while several per-share inputs translate to dollars, so the dollar-based ROE and book-value figures understate the real economics of a business that earns a 50.5% EBITDA margin. The methods anchored to those translated figures therefore read too conservatively. The relative methods bracket the price, with sector P/E near $9 and the Ben Graham formula near $13.
The practical read is that Afya is a high-margin, moat-protected compounder that trades cheaply on an operating-income basis, with the apparent expensiveness of the asset models driven largely by currency translation rather than weak economics. A reader is underwriting two things at today's price: that the seat-rationed Brazilian medical-education franchise keeps compounding at high margins, and that the real does not erode the dollar value of those earnings. On the operating economics the entry multiple is undemanding; the risks are regulatory and currency, not the quality of the business.
Catalysts
Afya reported Q1 2026 results in early May 2026 with revenue up 8.2% to R$1.01 billion, a 50.5% adjusted EBITDA margin, and net income of R$261.8 million, with medical schools running 100% full. The company reaffirmed full-year 2026 guidance of up to R$4.1 billion revenue and R$1.8 billion EBITDA. The next quarterly print is the checkpoint on whether tuition growth and the continuing-education and medical-practice-solutions segments keep building on the protected core.
The defining catalyst is seat authorizations. Afya secured 63 additional medical seats in Abaetetuba in February 2026, lifting that campus to 113, among other approvals across its campuses, and each new government-authorized seat is high-margin, fully-subscribed revenue for years. The pace of Ministry of Education authorizations is the single most important growth driver to watch, since organic seat additions compound directly into the moat.
The capital-allocation and rating signals are supportive: Moody's reaffirmed the AAA.br rating in May 2026, net debt to EBITDA improved to about 0.7x, and Afya has executed more than half of a buyback program authorized to run through December 2026. The swing factors are Brazilian regulatory policy and the real-dollar exchange rate: a change in seat, tuition, or financing policy, or a weaker real, would each affect the dollar value of the franchise more than ordinary operating results would.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- LAUR (Laureate Education, Inc.)
- (no filing in the citation store)
- PRDO (Perdoceo Education Corporation)
- (no filing in the citation store)
- STRA (Strategic Education, Inc.)
- (no filing in the citation store)
- LOPE (Grand Canyon Education, Inc.)
- (no filing in the citation store)
- GHC (GRAHAM HOLDINGS CO)
- (no filing in the citation store)
- LRN (Stride, Inc.)
- (no filing in the citation store)
- UTI (UNIVERSAL TECHNICAL INSTITUTE, INC)
- (no filing in the citation store)
- TAL (TAL Education Group)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.