Investing

Expected Price Gains at For-Profit Education Companies (APOL, EDMC, APEI, STRA, DV, WPO, COCO, BPI, LOPE, CECO)

Share prices at for-profit education companies peaked in June and July this year, following a slow start. At the beginning of the year there was widespread fear that new federal rules related to student loans, recruiting practices and employment upon graduation would eviscerate revenues and earnings. However, the rules changes were less onerous than anticipated, and stock prices gradually climbed back up. Enrollments are still a problem at some schools, but share prices are well above lows at most of the companies.

The ten companies we have looked at are Apollo Group (NASDAQ: APOL), Education Management (NASDAQ: EDMC), American Public Education (NASDAQ: APEI), Strayhorn Education (NASDAQ: STRA), DeVry (NYSE: DV), Washington Post (NYSE: WPO), Corinthian Colleges (NASDAQ: COCO), Bridgeport Education (NYSE: BPI), Grand Canyon Education (NASDAQ: LOPE), and Career Education (NASDAQ: CECO).

All data is from Yahoo! Finance, and current share prices were gathered in the mid-afternoon today.

Apollo Group has a median target price of $53.00 from 15 brokers. Shares are trading today at $46.09, for an implied gain of $6.91, or 15%. Apollo’s forward P/E is 12.72 and the company does not pay a dividend. The stock’s 52-week trading range is $33.75 to $54.23, and at today’s price that is about 37% above its 52-week low and 15% below the 52-week high. The company reported better-than-expected quarterly earnings a couple of weeks ago and jumped more than 10% in a day. But lower enrollments plague the company, which has managed to keep revenue up by raising tuition and fees.

Education Management has a median target price of $20.00 from 11 brokers. Shares are trading today at $20.48, about 0.5% above the target price. Education Management’s forward P/E is 13.36 and the company does not pay a dividend. The stock’s 52-week trading range is $11.56 to $28.61. At today’s price it is about 77% above its 52-week low and 28% below the 52-week high. The company beat both quarterly EPS and revenue estimates when it reported earnings last week. But a warning on future enrollment and profit declines have cooled enthusiasm for the shares.

American Public Education has a median target price of $45.00 from 10 brokers. Shares are trading today at $35.11, for an implied gain of $9.89, or 28%. APEI’s forward P/E is 14.50 and the company does not pay a dividend. The stock’s 52-week trading range is $26.15 to $49.29, and at today’s price that is about 49% above its 52-week low and 26% below the 52-week high. The company reports earnings next week and is expected to post EPS of $0.42 on revenue of $62 million. The EPS figure is less than the June quarter, but better than the same period a year ago.

Strayhorn Education has a median target price of $104.00 from 12 brokers. Shares are trading today at $83.06, for an implied gain of $20.94, or 25%. Strayhorn’s forward P/E is 11.39 and the company pays a dividend yield of 4.6%. The stock’s 52-week trading range is $69.34 to $165.73 Today’s price is about 29% above its 52-week low and 50% below the 52-week high. The company reports earnings on Thursday and is expected to post EPS of $1.07 on $139 million in revenue. That is a big dip from the same quarter a year ago, when EPS came in at $1.72, and an even bigger dip sequentially, from $2.53 in the June quarter.

DeVry has a median target price of $52.50 from 16 brokers. Shares are trading today at $38.14, for an implied gain of $14.36, or 38%. DeVry’s forward P/E is 8.55 and the company pays a dividend yield of 0.6%. The stock’s 52-week trading range is $34.24 to $66.85, and at today’s price that is about 11% above its 52-week low and 43% below the 52-week high. The company missed both EPS and revenue projections last week when it reported its first fiscal-quarter 2012 results. Enrollment was also lower as bleak job prospects keep potential students away.

Washington Post has a median target price of $275.00 from just a single broker. Shares are trading today at $336.80, about 18% above the target price. The forward P/E is 19.44 and the company pays a dividend yield of 2.6%. The stock’s 52-week trading range is $308.50 to $455.68. Today’s price is about 9% above its 52-week low and 26% below the 52-week high. The Kaplan education division of the company contributes more than 50% of Washington Post’s revenues and nearly half of net income. The company is expected to post EPS of $3.85 on revenue of $1 billion this Friday. The lack of coverage makes this stock a tough one to figure out.

Corinthian Colleges has a median target price of $2.00 from 10 brokers. Shares are trading today at $2.04, fractionally above the target price. Corinthian’s forward P/E is 9.93 and the company does not pay a dividend. The stock’s 52-week trading range is $1.24 to $6.12, and at today’s price that is about 65% above its 52-week low and 67% below the 52-week high.

Bridgeport Education has a median target price of $26.00 from 10 brokers. Shares are trading today at $22.94, for an implied gain of $3.06, or 13%. Bridgeport’s forward P/E is 8.88 and the company does not pay a dividend. The stock’s 52-week trading range is $13.89 to $30.62, and at today’s price that is about 65% above its 52-week low and 25% below the 52-week high. The company posted better-than-expected third-quarter earnings this morning and raised full-year EPS guidance to $2.95 to $2.98. Enrollment is expected to fall by about 5,000-8,000 students by the end of December.

Grand Canyon Education has a median target price of $18.50 from 10 brokers. Shares are trading today at $15.97, for an implied gain of $2.53, or 16%. Grand Canyon’s forward P/E is 13.22 and the company does not pay a dividend. The stock’s 52-week trading range is $12.26 to $20.66, and at today’s price that is about 30% above its 52-week low and 35% below the 52-week high. The company reports third-quarter earnings next week and is expected to post EPS 0f $0.25 on $109 million in revenues.

Career Education has a median target price of $20 from 11 brokers. Shares are trading today at $15.79, for an implied gain of $4.21, or 27%. The forward P/E is 8.77 and the company does not pay a dividend. The stock’s 52-week trading range is $12.24 to $27.60, and at today’s price that is about 29% above its 52-week low and 43% below the 52-week high. The company reports third-quarter earnings next week, and the consensus EPS estimate is $0.34 on $457 million in revenue. The EPS estimate has been trimmed from $0.46 over the past three months. Shares gained nearly 5% on October 19th, following the strong earnings report from Apollo.

Paul Ausick