American Public Education Inc.
(
APEI
) is well positioned in the online post secondary education
industry, thanks to its focus on recruits serving the U.S. military
as well as public service personnel. Moreover, the company's
part-time programs are well suited to irregular and extended work
schedules of these personnel, who travel and relocate frequently
and have limited financial resources. This provides a significant
upside potential for the company.
American Public has witnessed an impressive revenue growth over
the last four fiscal years. During 2007-2010, revenue surged from
$69.1 million to $198.2 million recording a compound annual growth
rate of 42%, driven by high student satisfaction and referral
rates, regional accreditation and access to Title IV programs.
Furthermore, management expects revenue to rise approximately 29%
in the fourth quarter of 2011. During the third quarter, American
Public witnessed a 35% jump in the top line.
The company's sustained effort to expand educational programs
helps it to boost enrollments. Net course registrations rose 32%
and net course registrations from new students climbed 53% in the
third quarter of 2011. Management now expects net course
registrations to rise approximately 28%, and net course
registrations from new students to jump approximately 29% in the
fourth quarter.
American Public has predicted growth in student enrollments for
the fourth quarter, despite the regulation proposed by the
Department of Education. However, we observe that management's
fourth quarter forecast for the rate of growth in enrollment is
lower than the third quarter. The company now primarily focuses on
increasing net registrations from civilian students, to safeguard
itself from the adverse impact of a fall in military registrations
due to increased military operations.
The Department of Education proposed that an educational program
could only qualify for Title IV funds, if it helps in achieving
gainful employment, which includes the criteria of loan repayment
rate and debt-to-income ratios. The company derives a major portion
of its revenue from federal student financial aid programs, the
Title IV programs. The education institutions are also under the
scanner due to the rise in the default rate of student loans.
Another for-profit education company,
Capella Education Company
(
CPLA
) cautioned that new enrollment in fourth-quarter 2011 is expected
to fall by approximately 10%. To counter sluggishness in students'
enrollment, education companies are resorting to restructuring
their cost base.
Further, American Public has a healthy debt-free balance sheet,
with cash and cash equivalents of $107.3 million at the end of the
third quarter. This offers the company financial flexibility to
drive future growth.
Currently, we have a long-term Neutral recommendation on the
stock. Moreover, American Public, which competes with
Apollo Group Inc.
(
APOL
), holds a Zacks #3 Rank that translates into a short-term Hold
rating, and correlates with our long-term view.
AMER PUB EDUCAT (
APEI
): Free Stock Analysis Report
APOLLO GROUP (
APOL
): Free Stock Analysis Report
CAPELLA EDUCATN (
CPLA
): Free Stock Analysis Report
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