On January 10, we maintained an Outperform recommendation on
American Public Education, Inc.
) as it has delivered positive growth in revenues, earnings and
enrollments consistently in sharp contrast to weak results by
most peers. The stock also carries a Zacks Rank #1(short term
Why the Reiteration?
American Public has been consistently delivering positive
growth in revenues, earnings and enrollments. It has delivered a
positive earnings surprise in the past four quarters with an
average of 13.4%. This is impressive, as on the other hand most
of its peers like
) have been witnessing consistent enrollment declines.
American Public reported its third quarter results in early
November. Third quarter 2012 earnings of 60 cents per share beat
both the Zacks Consensus Estimate and prior-year quarter's
adjusted earnings of 50 cents by 20%. Earnings were also
significantly above the guidance range. Cost savings banking on
the company's strategic initiatives made up for the modest
revenue growth, leading to the earnings beat.
Total revenues grew 18% year on year to $77.1 million. The
rate of increase was within management's expectation of a growth
in the range of 16% to 19%. Revenues slivered past the Zacks
Consensus Estimate of $77.0 million. Total and new enrollment
growth was also within management expectations.
American Public Education is gradually shifting focus from
military personnel to public service segments of the civilian
market. Though the shift in student mix to civilians would result
in higher selling and promotional costs and bad debts, it bodes
well for the company's long-term growth. These students generally
take more classes than military students and show higher
retention rates. We believe that the company's affordable tuition
costs and its shifting of student focus to the civilian market
are boosting enrollment growth.
Moreover, American Public is also entering into corporate
relationships, community college partnerships and international
opportunities to give it the necessary diversification from
volatile enrollment trends of active duty military students. In
addition, the company's fraud prevention initiatives to improve
student quality augur well for better student outcome and
AMER PUB EDUCAT (APEI): Free Stock Analysis
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