For those who are looking for a private Christian university
at state tuition rates, Grand Canyon University may just be the
place that offers the best of both worlds.
Phoenix-based provider of regionally accredited post-secondary
education runs 97 graduate and undergraduate degrees at seven
colleges. Its programs are held online as well as at a
traditional campus. The on-ground campus counts 6,500 students,
while its online campus has 46,000 enrolled students.
Its parent,Grand Canyon Education (
), went public in 2008 after it converted from a nonprofit
university in 2004 to a for-profit privately funded school with a
business plan of creating an online campus. In '04, the school
was debt-ridden and about to close.
"We went public in November 2008, and we got an infusion of
$254 million worth of funds and then we executed on our business
plan with that money," said GCU's president and CEO Brian
Mueller. "And now, what we have is a very thriving university
with very low tuition rates at no expense to either taxpayers or
donors, and our investors are getting a very good return on their
GCU's traditional campus tuition rates are $7,800 for an
average student, after scholarships. The university's published
rate is $16,500.
"For a private university, that's a really, really low tuition
rate," said Mueller. "Most students that attend private
universities are paying $25,000 or more per year after
scholarships for tuition. And so that's a big part of the reason
Indeed, GCU's growth projections are impressive in a
struggling for-profit education sector. Mueller expects to nearly
triple its traditional campus students to 15,000 in the next
three years. For the online university, he's projecting an annual
student growth rate of between 6% and 8%. This is equivalent to
total growth of between 8% and 10% and an increase in revenues of
10% to 12%.
While these numbers stand out in comparison with other
for-profit educational institutions, the company is exceeding
those in the short term. Last year, GCU was able to grow its
enrollments by 19%, while the industry's declined by 10%.
GCU's earnings per share grew at a rate of between 21% and 52%
in the last six quarters, while revenue increases ranged from 10%
"What's unique about Grand Canyon is their differentiated
position," said Peter Appert, senior research analyst at Piper
Jaffray. "The post-secondary business is very challenging for the
for-profit companies because the market is crowded, it's
competitive, it's increasingly commoditized.
"And to really stand out and generate enrollment growth in
this crowded and commoditized market, you have to have something
that differentiates you from the crowd."
Appert points out several things that differentiate GCU.
First, they have a very strong campus presence in Arizona. They
have a Christian affiliation. Their tuition pricing is
competitive with public schools. And finally, they focus on
program areas that are in demand, such as nursing.
The for-profit education industry experienced tremendous
growth in the early years while catering to a professional
demographic desiring to pursue online as well as on-campus
degrees. But in the past three years, the growth trends have
reversed as nonprofits have entered that area by offering
programs to nontraditional students as well. With that, the
capacity, and competition, in the market increased substantially,
while driving down profits.
That's why analysts believe that GCU is exceptionally
positioned thanks to its diversified structure.
"I think the companies that don't have differentiated
offerings, those companies will find it difficult to grow. I
don't think they are going out of business, but I think it's
going to be hard for them to generate unit growth," noted
"The hybrid model that we have, which is the traditional
ground campus combined with an online campus, sharing a common
infrastructure, has produced tremendous efficiencies," said
The programs that are offered online or on campus are the same
and cater to the working adult, 32-33 years old. A lot of the
students have families and want to be associated with a viable,
fast-growing campus, even if they are getting an online degree,
noted Mueller. The university also has low student-teacher
ratios, with an average class size of 20 students.
"They're also focusing on a local region," said Jeffrey
Silber, managing director at BMO Capital Markets. "A lot of the
schools are national, so it's a lot more difficult to market that
Another factor in the for-profit industry slowdown was that
the regulatory environment became stricter. Among other things,
it removed incentive compensation for recruitment of new
students. Currently, the talk of gainful employment requirement
has again come back.
"Gainful employment means that they have to be able to prove
that the programs that they're offering, students aren't taking
on more debt than the amount they are making in earnings," said
Silber. "Incentive compensation means that the campus can't
incentivize their recruiters based on the number of students they
Neither GCU nor analysts view this as a concern for the
university as it's already compliant with many of those