Chegg (CHGG 0.74%) is a direct-to-student online education platform. The company helps students (most of them in college) with their coursework. Not surprisingly, Chegg received a surge of customer interest at the pandemic's onset, when colleges were closed and students lost access to on-premise help. 

The trend is likely to reverse to some extent as colleges reopen. Still, whether the campus is open or not, students can benefit from Chegg's services. Overall, management believes there are 102 million students worldwide who can benefit from Chegg.

A boy on his laptop.

 Image source: Getty Images.

There's plenty of room to grow

At the end of its fiscal second quarter, the company had 6.6 million service subscribers. While it has penetrated a good percentage of the potential market, there is plenty of room for growth.

The meat of Chegg's services is a trove of academic material. Students can pay $14.95 per month for access to 66 million pieces of content. Additionally, as part of a subscription, they get to submit 20 questions per month to experts in the pertinent subject. For instance, if students are stuck on a homework assignment for an economics course, they can submit the question on Chegg's platform, and an expert will post a step-by-step guide on how to solve the problem.

That question and step-by-step solution then become content that the millions of other Chegg subscribers can view. After all, many other subscribers are probably taking or eventually will take the same subject as part of their college curriculum. 

Chegg has an efficient business model

In its effort to reach a larger total of its potential market, Chegg is likely to add customers at a low cost, a good thing to note for investors. The content Chegg provides doubles as an inexpensive customer acquisition tool. Here's how that works: A student types a query into a search engine, and if Chegg has relevant content, the site will pop up. With a few clicks and a payment, the student has the problem solved, and Chegg has a new subscriber. 

A chart showing Chegg's cash flow from operations.

Data by Ycharts.

That's leading to healthy growth in cash from operations. The metric increased from less than $60 million in 2017 to over $236 million in 2021 (see chart). Meanwhile, during that time, revenue grew from $255 million to $644 million. That demonstrates the kind of leverage you like to see as a shareholder: Cash flow from operations almost quadrupled while revenue didn't even triple.

The business model is efficient, content is paid for once, and it can be used multiple times and remains relevant in the long term. Customers come to Chegg through low-cost search engine queries, and the company doesn't have to spend on expensive marketing campaigns. For those reasons, Chegg's most crucial number could be 102 million, and attracting a larger share of that total could exponentially increase the company's annual cash flows.