Grand Canyon University 's (
), nickname and mascot is the antelope. But just about everyone
at the school calls themselves the 'Lopes.
That goes for the sports teams and investors in the stock of
the parent company, Grand Canyon Education which trades under the
Both sides are on a roll. Shares have rallied 43% this year.
Sports-wise, GCU was recently invited to join the Western
Athletic Conference, meaning all 18 teams will compete in NCAA
Division 1 competition, including men's and women's basketball,
baseball, wrestling and soccer.
University President and CEO Brian Mueller called Nov. 27, the
day the school accepted the honor, "historic." (The stock rose 4%
on the news.)
Division 1 status "will raise our university's profile and
illuminate the great things happening at Grand Canyon," Mueller
said in a statement.
Phoenix-based Grand Canyon might be part of the beleaguered
for-profit education sector. But it's not shrinking like many of
its online-heavy peers such asApollo Group (
),Strayer Education (
) andDeVry (
Analysts credit the appeal of a vibrant campus life, and the
sports teams that go with it, as one main reason.
For-profit colleges have been impacted by the fed's crackdown
on aggressive sales and recruitment practices. Also hurting
enrollments are the online inroads made by not-for-profit state
and community colleges, which have been expanding into their turf
with lower tuition and higher brand recognition.
"Grand Canyon is facing the same problems as the rest of the
industry," said BMO Capital Markets analyst Jeff Silber. "But it
is growing for two reasons."
One reason is that it is becoming "a real school," he says. It
has a sprawling campus in Phoenix, replete with dining halls,
dorms and a 55,000-square-foot recreation and fitness center.
Capping it all off is the new $40 million, 5,000-seat Grand
Canyon University Arena, which holds basketball games, concerts
and other events.
More than 7,400 students take classes on campus, a number that
has grown dramatically in recent years. "A few years ago it was
less than half that size," Silber said.
A lot of Grand Canyon's nearly 45,000 online students, many of
them working adults living in Arizona, often drop by for a taste
of campus life.
Grand Canyon's campus has helped attract students to its
online programs, analysts say.
"It is appealing to online students to know there is a
7,000-student campus sitting in Phoenix, Arizona," said Trace
Urdan, analyst with Wells Fargo Securities. "Most other
for-profit schools don't have traditional campuses. They are in
The 'Halo Effect'
What also sets Grand Canyon apart from other for-profit
education companies is its Christian orientation. That and its
campus create what Silber calls a "halo effect."
"It is a Christian school serving a target market that has
been growing," he said.
The school was founded in 1949 as a Baptist college but
eventually lost its way. In 2003, it was on the brink of
bankruptcy, with only 1,500 students.
A corporate savior appeared: turnaround expert and Phoenix
native Brent Richardson. He and an investor group acquired the
school, made changes and in 2008 took the parent company public,
raising $230 million.
Using proceeds from the IPO, a new era of growth began as the
campus was expanded and classrooms renovated. Richardson remains
a stakeholder in the company and its executive chairman.
Regionally accredited GCU is known especially for its programs
in education, nursing and health sciences. It also offers
graduate programs in various fields.
While costs to run a physical campus are much higher than for
an online school, Grand Canyon leverages the administrative costs
of the ground campus across all of its online students.
"If they were only operating a ground campus, they probably
wouldn't be profitable," Urdan said. "But all of those online
students are contributing to the overhead as well."
Grand Canyon's year-over-year earnings have grown in double
digits or better for six straight quarters. In Q3, per-share
profit jumped 41% to 41 cents, sending shares up 13%.
Revenue in the quarter rose 23% to $133.6 million as total
enrollment grew 17.3% from the year prior to around 52,300
Analysts expect earnings this year to rise 25% to $1.40 a
share and grow 21% next year, according to Thomson Reuters.
Revenue is seen rising 19% to $506 million this year and 12% next
Urdan says Grand Canyon's competitive pricing is also a factor
in its appeal.
"They are far less expensive than other online schools," he
said, "especially the University of Phoenix," operated by the
larger Apollo Group.
Apollo's revenue and profit have plummeted the last few years.
Its shares are 65% off their high.
Grand Canyon's published tuition rate is $16,500 a year, which
is less than most private universities but higher than state
universities in Arizona. After scholarships, however, the average
paid by a student is $7,800 a year.
Though Apollo's University of Phoenix has a ground campus, it
doesn't serve the typical 18- to 22-year-old undergrad as much as
Grand Canyon, Urdan says. Rather, Apollo focuses on working
adults, who rely more on federal loans.
Traditional undergraduates are known to get more financial
help from parents, have lower default rates and typically stay
longer until they graduate.
Grand Canyon's campus enrollment continues to grow and "demand
is strong," Urdan says.
Management aims to grow the ground campus to 15,000 students
by the fall of 2015.
But eastward expansion to a New England campus is off the
blackboard. Management recently turned down a donation of a
217-acre former prep school in Northfield, Mass., after
concluding the location was too remote and the costs for
upgrading infrastructure too high. But they didn't rule out a
second ground campus if the offer were right.
"Things are going so well in Arizona and the greater Southwest
that we will continue to invest in this regional strategy,"
Mueller said in a conference call.