They won't be replaced by AI: Should you buy shares in a company that trains mechanics and welders?

Now is a good time to buy shares of small-cap company Universal Technical Institute, says Barron's. Although its quotations have collapsed from the maximum marks, their growth potential is almost 40%. This is because the company trains specialists that artificial intelligence (AI) is unlikely to replace in the near future, the publication explains.

Universal Technical Institute has lost 19% from its June peak and is now trading at $29. This pullback provides investors with an opportunity to buy securities at a profit, Barron's said.

The publication calls Universal Technical Institute a high-quality small-cap company with solid fundamentals and considers it a smart addition to investment portfolios.

Universal Technical Institute, with 32 campuses in the U.S., has established itself as a leading provider of vocational training, the publication writes.

The company's business consists of two divisions. The first, UTI, trains professionals for the transportation industry. Its oldest mechanic school, which provides direct employment through partnerships with automakers, is 60 years old. But UTI also offers programs in such in-demand specialties as aircraft maintenance, wind turbine installation, welding, and HVAC and refrigeration, Barron's writes. The second division is called Concorde Career Colleges, and it trains professionals for the health care industry.

The company "fills a critical niche in the U.S. labor market by training professionals for occupations that <...> are difficult to automate," Ruoshi Qi, a portfolio manager at Hood River Capital Management, one of the company's largest institutional investors, told Barron's.

Qi notes: UTI programs are in demand among students because they are linked to clear career opportunities and employer demand. McKinsey predicts that by 2032, demand will be 20 times greater than supply. This will require companies to spend $5.3 billion a year just on recruiting and training personnel.

At the same time, UTI is launching programs related to emerging technologies for future professionals in building wiring, networked computer systems, wireless technology and industrial robotics, Barron's cited.

The last time Universal Technical Institute published quarterly reports was in August. Then it reported a 15.1% year-on-year increase in revenue to $204.3 million and a 113.9% increase in net income to $10.7 million.

The main risk for investors is a potential decline in the company's growth rate, the publication notes. It advises to keep an eye on student enrollment data, as well as possible changes in commercial education regulations.

Universal Technical Institute securities have seven recommendations from Wall Street analysts and all of them are buy, MarketWatch shows. The average target price is $37.43, which means the potential upside of 29% to the securities' value on September 23.

Jasper Bibb, vice president of equity research at Truist Securities, recently reiterated a "buy" recommendation and a $40 target, attributing this in part to the fact that the company is recruiting students at a higher rate than expected, Barron's writes. Bibb believes a key catalyst was the Donald Trump administration's efforts to expand federal funding to support short-term technical training programs.

This article was AI-translated and verified by a human editor