Breaking Down Afya Limited (AFYA) Financial Health: Key Insights for Investors

If you are looking at Afya Limited (AFYA) as a growth-at-a-reasonable-price play in the resilient medical education sector, the latest Q3 2025 results defintely reinforce that thesis, but the capital allocation moves are the real story. The company delivered a strong nine-month performance, posting total revenue of R$2,784.3 million, a 13.4% year-over-year jump, which puts them solidly on track to meet their full-year revenue guidance of R$3,670 million to R$3,770 million. What's more compelling for a seasoned investor is the margin expansion: third-quarter Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization-a proxy for operational cash flow) grew 14.6% to R$398.9 million, pushing the margin to a robust 43.0%. Honestly, that kind of operational efficiency in a high-growth environment is rare. Still, you need to look past the top-line growth and understand how their recent R$1.5 billion commercial notes issuance and subsequent debt repayment impacts long-term capital structure and shareholder value, especially with the ecosystem now reaching nearly 304 thousand users.

Revenue Analysis

Afya Limited (AFYA) is demonstrating strong top-line growth in 2025, primarily driven by its core medical education business. The company is on track to meet its full-year revenue guidance, which projects net revenues between R$3,670 million and R$3,770 million for the 2025 fiscal year.

For the first nine months (9M) of 2025, total revenue reached R$2,784.3 million, marking a 13.4% increase year-over-year (YoY). This growth is defintely solid, but it's important to see the underlying drivers-it's not all organic. Revenue growth excluding the impact of acquisitions, which is a cleaner look at core business performance, was a still respectable 9.8% for the same nine-month period.

Primary Revenue Streams and Segment Contribution

Afya's revenue is fundamentally built on three pillars: Undergraduate (UG), Continuing Education (CE), and Medical Practice Solutions (MPS). The Undergraduate segment, which includes its high-value medical school courses, remains the dominant revenue source and the primary engine of the company's financial health.

The Undergraduate segment's revenue growth is fueled by two key factors: higher tuition fees and the maturation of medical school seats (meaning more students move into higher-priced years). This is a predictable, recurring revenue model. For the nine-month period ended September 30, 2025, the Continuing Education segment, which includes graduate programs, contributed R$208 million to the total revenue, reflecting an 11% YoY growth.

Here's the quick math on the 9M 2025 revenue breakdown, showing where the money is coming from:

What this estimate hides is the precise 9M MPS number, but we know the Q3 MPS revenue was R$128.193 million, showing strong growth of 9.3% in the quarter. The Undergraduate segment is clearly the heavyweight, generating the vast majority of your revenue.

Significant Revenue Stream Changes

You need to watch two major shifts in how Afya Limited is generating new revenue. First, acquisitions are playing a much larger role. The addition of new schools, like Faculdade Masterclass Ltda. (FUNIC), adds new medical seats and immediately boosts the top line.

Second, the Medical Practice Solutions (MPS) segment is showing strategic diversification. This segment, which includes digital solutions like Afya Whitebook and Afya iClinic, is seeing significant growth in its Business-to-Business (B2B) and Business-to-Physician (B2P) revenue streams.

• B2B Revenue: Saw a massive 65% increase in the Continuing Education segment, reflecting a successful push into institutional sales.
• B2P Revenue: Grew by 11% in the Medical Practice Solutions segment, showing doctors are increasingly adopting their clinical management software.

This move into digital solutions, while still a smaller part of the overall mix, is a smart hedge against any future slowdown in core education enrollments. It's an ecosystem play. You can read more about this in our full analysis: Breaking Down Afya Limited (AFYA) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking for a clear signal of financial strength, and Afya Limited (AFYA) is delivering exactly that through its core profitability metrics. The company's focus on high-value medical education translates directly into impressive margins that significantly outperform the Brazilian higher education sector.

For the nine-month period ending September 30, 2025, Afya reported a Net Revenue of R$2,784.3 million and a Net Income of R$593.0 million. Here's the quick math on the key margins:

• Net Profit Margin: Approximately 21.3%.
• Operating Profit Margin (Adjusted EBITDA): 46.4%.

That 46.4% Adjusted EBITDA Margin is a powerful indicator of operational efficiency. It's a high-margin business, plain and simple.

Operating Efficiency and Margin Trends

The real story isn't just the absolute numbers, but the clear trend of margin expansion. Afya is not just growing revenue; it's getting more profitable on every dollar of sales. For the nine-month period in 2025, the Adjusted EBITDA Margin expanded by 200 basis points (2.0%) year-over-year. This upward trajectory is a strong sign of management's discipline.

This margin expansion is primarily driven by three factors:

• Higher Gross Margin: The company specifically cited a higher gross margin in its Undergraduate and Continuing Education segments. This means the cost of delivering its core educational services is growing slower than its tuition revenue.
• Cost Management: Improved efficiency in Selling, General, and Administrative (SG&A) expenses is also a key factor.
• Maturation of Campuses: The ongoing ramp-up of new medical school seats and campuses, which have high fixed costs, provides significant operating leverage as they reach full capacity.

Industry Comparison: Afya vs. the Sector

The profitability ratios for Afya Limited (AFYA) are not just good; they are defintely best-in-class for the Brazilian for-profit education market. You need to see how they stack up against the competition to appreciate the premium valuation the market often assigns to this stock.

Here is a snapshot of Afya's 9M 2025 performance against the broader industry:

Afya's 46.4% Adjusted EBITDA Margin is a structural advantage, largely because of the high demand and pricing power of its medical school courses. While the industry average for Net Profit is competitive with Afya's 21.3%, Afya's massive operational margin (EBITDA) suggests a much stronger core business before accounting for depreciation and financing costs. This superior operational efficiency is a direct result of their strategic focus on medical education, which you can read more about in their Mission Statement, Vision, & Core Values of Afya Limited (AFYA).

Debt vs. Equity Structure

You want to know if Afya Limited (AFYA) is financing its rapid growth with too much debt, and that's a smart question. The direct takeaway is that Afya has a conservative capital structure, favoring equity and operational cash flow over heavy leverage, especially when compared to the broader, often 'super levered' Brazilian education market.

As of the end of the third quarter of 2025, Afya's balance sheet showed a healthy reliance on equity. Their total equity stood at a strong R$4,786,592 thousand (approximately R$4.79 billion). This is the foundation of the business, and it's defintely a solid one.

Debt Levels and Leverage Profile

When we look at the core debt-loans and financing, excluding lease liabilities (IFRS 16)-Afya's levels are very manageable. The company's total loans and financing debt as of September 30, 2025, totaled R$1,103,649 thousand (about R$1.1 billion).

Here's the quick math on the breakdown of that debt:

• Short-Term Debt: Loans and financing due within one year totaled only R$106,810 thousand.
• Long-Term Debt: Loans and financing due beyond one year were R$996,839 thousand.

The more critical metric for a growth company like Afya is the Net Debt (excluding lease liabilities) to Adjusted EBITDA ratio (earnings before interest, taxes, depreciation, and amortization). The company projects its mid-guidance for this ratio in the 2025 fiscal year to be a very low 0.8x. That signals a tremendous ability to service its debt with operating profits.

Debt-to-Equity Ratio and Industry Comparison

The Debt-to-Equity (D/E) ratio tells you how much debt the company uses to finance assets relative to the value of shareholder equity. Using the September 30, 2025, figures for loans and financing against total equity, Afya's D/E ratio is approximately 0.23:1 (or 23%).

To be fair, a good benchmark for the US education sector is around 19.44%, so Afya's ratio is slightly higher, but still in a very comfortable range. Considering the Brazilian education sector's history of being 'super levered', Afya's ratio is a sign of disciplined capital management and a significant competitive advantage. This low leverage gives them a lot of flexibility for future acquisitions.

Recent Refinancing and Equity Strategy

Afya is actively managing its capital structure, not just letting it sit. In October 2025, they executed a major refinancing and capital optimization move, which is crucial to understand.

The company issued new commercial notes totaling R$1.5 billion. This new debt, with maturities extending to 2028 and 2030, was immediately used to execute two strategic actions:

• Debt Repayment: They fully repaid R$500 million of a prior debenture issuance. This extended their debt duration, moving short-term liabilities further out.
• Equity Repurchase: They repurchased all Series A perpetual convertible preferred shares from SoftBank for R$831.6 million. This is a smart move that simplifies the capital structure and removes a potential future dilution risk.

This balance of new, longer-term debt to repay older debt and repurchase equity shows a sophisticated approach: they're using debt to optimize their equity structure and extend maturity, reinforcing their disciplined approach to capital management. For more on their strategic focus, you can review their Mission Statement, Vision, & Core Values of Afya Limited (AFYA).

Finance: Monitor the cost of the new CDI+ spread debt versus the old debenture rate to ensure the refinancing truly lowers the all-in cost of capital.

Liquidity and Solvency

You're looking at Afya Limited (AFYA)'s balance sheet to figure out if they can cover their short-term bills, and honestly, the picture is a bit of a split screen. On one side, you see a cash-generating machine, but on the other, the traditional liquidity ratios flash a warning sign. The direct takeaway is that while the company holds a strong cash position and converts operations into cash efficiently, its reliance on that cash flow is high because its current assets don't fully cover its current liabilities.

Current and Quick Ratios: A Closer Look at Working Capital

The standard liquidity metrics, the Current Ratio and Quick Ratio (or Acid-Test Ratio), tell you how easily a company can pay off its short-term debt (liabilities due within one year) using its short-term assets. For Afya Limited, the numbers from the second quarter of 2025 (Q2 2025) suggest a tight spot. The Current Ratio was 0.94, and the Quick Ratio was 0.91.

Here's the quick math: a ratio below 1.0 means current liabilities exceed current assets. In Q2 2025, Afya Limited had R$0.94 of current assets for every R$1.00 of current liabilities. This translates directly into a negative working capital position, which is a trend you defintely need to watch. What this estimate hides is the high quality of their assets-namely, the strong cash flow from their medical education business, which is a recurring revenue model. Still, depending on the timing of receipts and payments, this negative working capital can create short-term cash flow pressure.

• Current Ratio (Q2 2025): 0.94
• Quick Ratio (Q2 2025): 0.91

Cash Flow Statements Overview: The Real Strength

The cash flow statement is where Afya Limited's real strength lies. For the nine months ended September 30, 2025 (9M25), the company demonstrated exceptional cash generation from its core business, which is a major offset to the low current ratio. Net cash flow from operating activities was a robust R$1,277.763 million, and the Operating Cash Conversion Ratio was an impressive 101.5%. This high conversion ratio means nearly all of their earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) are turning into actual cash in the bank.

However, the Investing and Financing sections show where that cash is going. Afya Limited is actively using cash for growth and debt management, which is a strategic choice. For 9M25, the company used R$448.036 million in investing activities, largely for acquisitions and capital expenditures to expand its medical education ecosystem. On the financing side, they made significant debt repayments, including R$301.692 million in principal payments on loans and financing.

This is a growth company, so they spend cash to expand. You can see their long-term strategy in their Mission Statement, Vision, & Core Values of Afya Limited (AFYA).

Liquidity Concerns and Strengths

The main strength here is the operating cash flow and a solid cash balance of R$996.8 million as of September 30, 2025. This cash pile acts as a buffer against the low current and quick ratios. Plus, their Net Debt to Adjusted EBITDA ratio (excluding IFRS 16) is a very conservative 0.8x based on the mid-guidance for 2025, which shows a strong deleveraging trend. That's a low leverage position.

The potential concern is the structural negative working capital. If cash collections from students were to slow down unexpectedly, the low current ratio means Afya Limited would need to dip into its cash reserves or rely on new financing to cover its immediate payables. However, the high cash conversion ratio suggests that, for now, their operations are generating more than enough cash to overcome this structural challenge. The risk is manageable as long as the core business remains robust and predictable.

Valuation Analysis

You are looking at Afya Limited (AFYA) and wondering if the market is missing something, and honestly, the valuation metrics suggest you might be right. The short answer is that, based on a deep dive into the 2025 fiscal year data, Afya Limited (AFYA) appears undervalued compared to its industry peers, but the market is still exercising caution.

As a seasoned analyst, I focus on the core ratios to cut through the noise. Here's the quick math on Afya Limited (AFYA)'s valuation as of November 2025. The Price-to-Earnings (P/E) ratio is sitting at about 10.36 (trailing twelve months), which is notably lower than the Consumer Services industry average of around 16.0x. A forward P/E of just 8.16 suggests analysts expect earnings growth to continue, making the stock look even cheaper on a forward-looking basis. That's a strong signal.

When we look at the Enterprise Value-to-EBITDA (EV/EBITDA) ratio, which is a better measure for capital-intensive businesses, Afya Limited (AFYA) trades at approximately 6.68. This is a very reasonable multiple, especially when you consider the company's strong Adjusted EBITDA growth of 18.5% for the first nine months of 2025. The Price-to-Book (P/B) ratio is also modest at about 1.52.

• P/E Ratio (TTM): 10.36
• P/B Ratio: 1.52
• EV/EBITDA: 6.68

Stock Price and Dividend Reality Check

The stock price trend over the last 12 months tells a story of volatility, but also a potential bottoming. The 52-week range has been between a low of $13.47 and a high of $19.90. As of early November 2025, the stock is trading around $14.45, and has delivered a -6.1% return over the last year. This creates an interesting setup: strong fundamentals at a depressed price.

Afya Limited (AFYA) also offers a small but sustainable dividend. The annual dividend is approximately $0.23 per share, which translates to a dividend yield of about 1.58%. The payout ratio is very healthy at around 17.42% of trailing earnings. This low payout ratio means the dividend is defintely safe and leaves plenty of room for reinvestment back into the business, which is critical for a growth-focused medical education provider. You can read more about their strategy in their Mission Statement, Vision, & Core Values of Afya Limited (AFYA).

Analyst Consensus and the Opportunity

The Wall Street analyst community is split, which is often where the real opportunity lies. The consensus rating is generally a 'Hold' with an average 12-month price target of around $18.25. However, some analysts have a 'Strong Buy' consensus with an average target of $20.33. What this estimate hides is the more aggressive Discounted Cash Flow (DCF) models, which suggest an intrinsic value as high as $32.24 per share.

The market is clearly pricing in some risk, likely related to the Brazilian regulatory environment or currency fluctuations. Still, the underlying cash flow generation is strong, and the valuation multiples are too cheap for a company growing its Adjusted EBITDA by nearly 19%. I see a clear disconnect here. Your next step should be to model a scenario where the P/E multiple simply reverts to the industry average of 16.0x to see the immediate upside.

Risk Factors

You're looking at Afya Limited (AFYA)'s strong 2025 numbers-like the 9-month revenue hitting R$2,784.3 million and Adjusted EBITDA at R$1,291.7 million-and that's great, but a seasoned investor always maps the risks. The biggest concerns for Afya right now are not internal operational failures, but external forces: regulatory shifts and market saturation.

The core of Afya's business, medical education, is defintely tied to the Brazilian government's Ministry of Education (MEC). This regulatory dependence is a primary risk. The supply of new medical school seats, which drives Afya's growth, is controlled by the MEC, often through programs like 'Mais Médicos.' Any unfavorable change in these federal regulations could immediately cap their growth potential.

Here's the quick math on the external risks you should track:

• Market Saturation: Brazil's doctor-to-population ratio reached 2.9 per 1,000 inhabitants in 2025, up from 2.1 in 2021. This rapid increase suggests the long-term risk of saturation, which will eventually pressure enrollment demand and pricing power for medical schools.
• Taxation Changes: Potential shifts in Brazil's tax laws threaten earnings stability. For instance, the Q3 2025 net income of R$159.4 million was partially offset by new 'additional taxation provisions related to OCDE Pillar two global minimal tax effects.'
• Competition: Rising competition for student enrollments is a constant threat, forcing Afya to continually invest in quality and its end-to-end ecosystem.

Afya is also exposed to standard financial risks, which their September 30, 2025, financial statements highlight as market risk, credit risk, and liquidity risk. Still, their operating cash conversion ratio was a strong 101.5% for the nine-month period, so their ability to turn profit into cash is excellent.

Mitigation Strategies and Clear Actions

Afya is actively managing these risks. Their strategy is to build an ecosystem that is less dependent on new undergraduate medical seats and more on recurring revenue from practicing physicians. They are expanding their Medical Practice Solutions and Continuing Education segments. This is smart because it diversifies revenue away from the highly regulated undergraduate segment.

They are also using financial engineering to manage capital risk. In October 2025, Afya issued R$1.5 billion in commercial notes, which was a move to strengthen their capital structure by repurchasing shares and repaying debt. This disciplined capital management reduces their financial risk exposure.

The key takeaway is that Afya's long-term value hinges on its ability to execute its digital and continuing education strategy to offset the inevitable saturation in its core undergraduate market. You need to see continued growth in the Medical Practice Solutions segment revenue. For a deeper look at their long-term vision, review their Mission Statement, Vision, & Core Values of Afya Limited (AFYA).

Growth Opportunities

You're looking for a clear map of Afya Limited (AFYA)'s future, and the picture for 2025 is one of disciplined expansion and margin growth, not just top-line revenue chasing. The company's full-year revenue guidance, reaffirmed in November 2025, projects a range of BRL 3,670 million to BRL 3,770 million, which is a solid expectation built on their core medical education business.

The real story is in how they're growing. Afya Limited is not just adding schools; they are deepening their integrated ecosystem (a comprehensive support system for medical students and professionals). This strategy is what drove nine-month 2025 (9M25) revenue to R$2,784.3 million, a 13.4% year-over-year jump. That's a powerful engine.

• Product Innovations: Upgrading core offerings with AI-enabled enhancements for Afya Whitebook, iClinic, and ReceitaPro to boost clinical productivity.
• Market Expansions: Successfully integrating recent acquisitions like FUNIC, which added 60 medical seats in May 2025, and seeing high occupancy across all medical schools.
• Segment Growth: Seeing higher tickets in medicine courses and expansion in Clinical Management active payers within Medical Practice Solutions.

The company's focus on operational excellence is defintely showing up in the bottom line. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for 9M25 hit R$1,291.7 million, an 18.5% increase year-over-year, pushing the margin to a healthy 46.4%. For the full year, analysts expect Adjusted EBITDA to land between R$1.62 billion and R$1.72 billion.

Here's the quick math on their strategic capital moves, which signal confidence in future cash flow:

What this estimate hides is the power of their competitive moat: a strong, high-margin, and predictable undergraduate medical education business that acts as a stable base for the more volatile, but high-growth, Medical Practice Solutions segment. Their ability to achieve full occupancy in all medical schools reinforces their brand and pricing power, which is a massive advantage in the Brazilian market. You can see their underlying philosophy here: Mission Statement, Vision, & Core Values of Afya Limited (AFYA).

Their integrated ecosystem is a key competitive advantage. It locks in the customer-the medical professional-from their first day of school through their entire career, creating a sticky, recurring revenue stream that's hard for competitors to break. This is the foundation for their long-term value creation.

Next step: Dig into the Medical Practice Solutions segment growth, specifically the user adoption rates for Afya Whitebook and iClinic, to gauge the true monetization potential of that ecosystem.