Saturday, October 06, 2012

Are You Smart Enough to Buy For-Profit Education Stocks?

With the Department of Education tightening up on rules relating to for-profit education companies and the recession, the publicly stocks of private education companies have been severely beaten down. As an example, Apollo Group (APOL), the company that owns the University of Phoenix and other educational institutions, has tanked by over 45% year to date. Another player in the for-profit education field is Strayer Education (STRA), which has had a stock price drop of over 31% since the beginning of the year.

Apparently there are plenty of for-profit education stocks. According to, there are over 35 education companies that own private colleges, universities, and other educational institutions, with about a quarter of them paying dividends. Also, it is interesting to note that about a third of these stocks are of companies based in China.

Let's take a look at Apollo and Strayer. Apollo trades at a very favorable seven times trailing earnings, and nine times forward earnings. Earnings for the latest quarter were down around 39% on an 8.5% drop in revenues. The stock has 5.31 in cash per share and does not pay a dividend. The company has scheduled its earnings announcement for the latest quarter for the middle of October.

Strayer is one of the education stocks that pays a dividend, and a healthy one at that at 6.3%. Dividends have been increased in nine out of the last ten years. The stock trades at nine times trailing earnings and 11.5 times forward earnings. Earnings for the latest quarter were down 28.5% on a 10.7% drop in revenues. The company has over 90 campuses in Alabama, Arkansas, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, and Washington.

DeVry, Inc. (DV) is another education stock that has suffered a huge drop, falling by 38% year to date. The stock trades at 11.4 times trailing earnings and 10.8 times future earnings. It pays a yield of 1.3%.

Are these stocks ripe for a year-end tax-selling bounce? Are they possibilities for a long term investment? Maybe you you take a closer look at these and a few of the other for-profit education companies. A free list of these companies can be found at, which can be downloaded, updated, and sorted.

Disclosure: Author didn't own any of these stocks at the time the article was written.


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