Education services has counter-cyclical tendencies. As the economy slows the classrooms crowd. As of last fall there was a post secondary education population of 18.2 million of which 1.4 million attended for profit schools. This is demonstrated in the influx of new students attending via the web as well as through on-campus sites. Fuel for growth: The Higher Education Act of last August allows for the expansion of Pell Grants and higher loan limits. Some of the concerns: private loans are drying up; Title IV government loans primarily go to low income students with higher likelihood of default. I scanned Value Line for revenue and earnings growth. All these companies seem to have strong top line growth and most have little or no debt.
ITT Educational Services (ESI) announced their quarter this morning and it has been a catalyst for all the electronic education stocks. ESI earned $1.60 in 4Q versus a $1.20 estimate. Much more importantly, ESI had 29% increase in enrollment. This confirms what the education stocks have been telling us; out of work folks are trying to reinvent themselves by going back to school.
Among other names: Corinthian College (COCO); has 70,000 students on campuses as well as electronic. Revenues last year of $1.068mm, estimates of $1.230mm for this year. DeVry (DV); the grand daddy of the schools with 52,000 students. Revenues of $1.091mm last and $1.350mm this, +21%. ROE of 18.5%. DV reports on the 24th. Strayer Education (STRA); Revenues of $390 million last and $465E this. No debt and a ROE of 44%. Grand Canyon Education (LOPE) is one of few IPO’s of the last six months. Shares are up 66%+ since the offering. A thin trader with little forward guidance. Apollo Group (APOL); revenues of $3.1 billion last year and $3.4 billion this year. No LT debt and ROE of 43%.
