What happened

Shares of 2U, Inc. climbed 29.5% across the first six months of the year, according to data provided by S&P Global Market Intelligence. The online education company delivered two strong quarterly reports and began expansion initiatives, signaling that there's still upside in the stock despite the fact that it has increased in value roughly 175% over the last three years.

TWOU Chart

TWOU data by YCharts.

2U reported fourth-quarter earnings results on Feb. 26 and then first-quarter earnings on May 3. The company managed to beat the market's top- and bottom-line expectations with each earnings report, prompting substantial valuation gains after each release.

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Image source: Getty Images.

So what

2U announced impressive fourth-quarter earnings results in February, with sales climbing 51% year over year to reach $86.7 million. The bottom line also swung from a $2.2 million loss in the fourth quarter of 2016 to net income of $500,000 in the comparable period in 2017. 

The company then reported first-quarter earnings in May, once again delivering strong results that were followed by substantial share price gains. Sales for the period increased 42.4% year over year to hit $92.3 million. Net income for the period took a turn for the worse, dipping from a $3.4 million loss in the first quarter of 2017 to a $14.9 million loss in the first quarter of 2018, but the big drop-off stemmed from absorbing most of the costs of launching its graduate program in the period. The company also raised its full-year sales and earnings targets following the earnings release.

Shares saw significant sell-offs at the end of June on news that the company would acquire CritiqueIt -- a provider of digital annotation technology. However, the stock bounced back not long after.

Now what

2U stock is up roughly 11% in July as of this writing -- with substantial movement following the company's July 10 announcement that it had renewed its contract with Washington University in St. Louis for another 12-year period.

TWOU Chart

TWOU data by YCharts.

With the costs of secondary education rising and the importance of having a degree in order to compete in the job market, there seems to be a good chance that there will be increasing demand and market receptivity to 2U's offerings. With the company's basic business model already proving to be viable and the company scaling up to expand its operations in international markets and expand its course offerings, 2U has promising avenues to growth.

On the other hand, the company already has a growth-dependent valuation -- trading at roughly 13 times this year's expected sales. Investors will have to weigh the stock's current pricing against their assessment of the business' long-term potential.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends 2U. The Motley Fool has a disclosure policy.