Rising earnings estimates on the back of strong first-quarter
fiscal 2013 results, which included a 58.1% earnings surprise,
helped this diversified education provider
) achieve a Zacks #1 Rank (Strong Buy) on December 29. This stock
turned around from past few quarterly results and has bright
prospects going forward.
The stock is currently trading at 80.9% discount to its
52-week high of $42.37. With a discounted price and long-term
expected earnings growth rate of 9.8%, this stock offers an
attractive investment opportunity.
The Rank Drivers
Combination of a solid cost-control strategy, improving new
student enrollments, brand building and growth investments and an
upbeat outlook are the rank drivers for this stock.
On October 25, DeVry reported first-quarter fiscal 2013 (ended
September 30) earnings of 49 cents per share, largely beating the
Zacks Consensus Estimate of 31 cents by 58%. Higher-than-expected
cost savings and improving new student enrollments at several
institutions drove the earnings beat.
Continued progress on its performance improvement plan to
align costs, regain enrollment growth and make growth investments
helped the company to turnaround from the past few weak quarterly
Revenue of $482.7 million also beat the Zacks Consensus
Estimate of $481 million primarily driven by better-than-expected
new enrollment growth at the medical institutions. Though
post-secondary enrollments across all its programs declined year
over year, the company witnessed solid new enrollment growth in
healthcare institutions like Chamberlain College of Nursing and
Carrington Colleges. The sequential improvement in new
enrollments at DeVry University is also an encouraging sign.
Operating costs declined both year over year and sequentially
owing to DeVry's cost saving initiatives. Though near-term
results are expected to remain choppy due to continued enrollment
declines at the flagship DeVry University, we believe that the
company has a solid plan to reduce costs and drive attractive
earnings growth in the 2014-2016 period.
Earnings Estimates Rising
Over the last 60 days, the Zacks Consensus Estimate for fiscal
2013 has increased 2.4% to $2.16 per share, as all the 14
estimates were revised higher. The Zacks Consensus Estimate for
fiscal 2014 has risen 0.8% to $2.45 per share, with 12 out of 14
estimates going up over the same time frame, reflecting a
year-over-year increase of 13.6%.
DeVry looks expensive at current levels. DeVry currently
trades at a forward price-to-earnings (P/E) of 11.01,
representing a premium of 42.2% to the peer group average of
7.74. On a price-to-sales basis too, the stock is trading at
0.73, a premium of 73.8% to the peer group average of 0.42.
However, the shares trade at a discount of 9.8% to the peer
group on a price-to-book value basis. Overall, the premium
valuation looks justified given its strong fundamentals.
About the Company
DeVry provides secondary and post-secondary education
primarily in the U.S. and also has operations in Canada, some
Caribbean countries, Brazil, Europe, the Middle East and the
Pacific Rim. The company's programs focus mainly in the fields of
business, healthcare and technology.
The company also serves accounting and finance professionals.
The market cap of the company is $1.5 billion. DeVry, a peer of
), carries a Zacks #3 Rank (short term Hold rating).
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