DeVry Buys FAVIP, Expands in Brazil - Analyst Blog

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Recently DeVry Inc. ( DV ), one of the largest providers of higher-education in North America, acquired Faculdade do Vale do Ipojuca ("FAVIP"). FAVIP, which is based in Fortaleza, CearĂ¡, Brazil will form a part of DeVry Brasil.  

Based in the state of Pernambuco, FAVIP offers more than 30 undergraduate and graduate programs to about 5,000 students at two campuses located in Caruaru. The institution is well known for its programs in law, business, psychology and nutrition.

Following its integration into DeVry Brasil, FAVIP will benefit from the academic expertise of DeVry Brasil, its virtual libraries and research databases, infrastructural and technological investments, international exchange programs and projects and English language courses at a lower cost. FAVIP is one of the fastest growing educational institutions and will be able to capitalize on the opportunities that will come with this acquisition.

On the other hand, for DeVry, this is an opportunity to increase its share of the educational market in Northeast Brazil. With a GDP of 5.1% the country is growing at a fast pace and soon there will be a huge demand for skilled labor.

There is a large gap between the skills required by the industry and those of college students. As such, with increasing middle class population, there will be a growing demand for career-oriented programs.

Private educational institutes like DeVry can play a role in bridging this gap by providing career-oriented educational programs. Previously, in February 2012, DeVry acquired the Faculdade Boa Viagem to expand its presence in Northeastern Brazil.

Given the fact that DeVry Brasil has been seeing strong growth in enrollments, when the rest of the company is witnessing declines, this acquisition may be considered a wise move.

The persistent decline in enrollment is mainly due to the weak macroeconomic environment and subsequent decline in student demand (due to the hesitancy over taking a loan). Further, modifications made to the business to comply with new regulations have also been hurting enrollment growth.

Other than enrollment declines, DeVry had a tough time due to heavy investments in scholarships to support students who are facing the brunt of recent cuts to the Pell Grant program.

DeVry Inc. carries a Zacks #5 Rank in the near term (Strong Sell rating). We currently have an Underperform recommendation on DeVry Inc. We believe that though management is trying to boost its business and control costs, it might take time for these initiatives to deliver the desired results.


 
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