Educational Gains

02/21/2003 12:00 am EST

Focus:

Jim Collins

Chairman and CEO, Insight Capital Research & Management, Inc.

Several leading advisors are bullish on the prospects for higher education. Vahan Janjigian notes, "Studies consistently show a direct relationship between education and income. The more one obtains of the first, the more one gets of the second." The editor of The Forbes Growth Investor picks his top play in the sector. Jim Collins, editor of Listed Insight, also picks a favorite educational play.

"ITT Educational Service (ESI NYSE) is a leading provider of technology-oriented post-secondary degree programs," notes Jim Collins, editor of Listed Insight. "The company operates 72 ITT Technical Institutes in 28 states, which predominantly provide career-focused degree programs in fields of technology to approximately 33,000 students. Curriculum offerings, leading primarily to associate and bachelor degrees, are designed to help students prepare for careers in various fields such as information technology, electronics, computer-aided drafting and design, and telecommunications.

"The company has signed a memorandum of understanding with NIIT Limited of New Delhi, India. Under the terms, ITT will offer bachelor degree programs of study online via distance education over the Internet to graduates of NIIT who are located in India, Nepal, Sri Lanka, and Bangladesh. For the quarter ended December 31, 2002, ITT reported earnings of $0.40 a share, a 31% increase over the prior year. Revenues increased 13% to $126 million. The stock hit a high last May of $26.65. After a dip down to $14.14 in mid-October, the stock has rallied and broken into the high $20s. The company receives a B rating for accumulation and distribution and has a relative strength of 91."

Adds Vahan Janjigian, editor of The Forbes Growth Investor, "The Apollo Education Group (APOL NASDAQ) provides a non-traditional avenue for working adults to satisfy a need and desire for more knowledge. The firm owns The University of Phoenix Inc., which offers degree programs on 41 campuses and 84 learning centers in 25 states. The University of Phoenix Online (a separate, publicy traded company) is also part of the Apollo Group. Its Institute for Professional Development offers course management services to 21 accredited private colleges that cater to working students. Its College for Financial Planning offers MS degree programs in financial planning and analysis.

"The Apollo Group reported consolidated revenues of $308 million for the quarter ended November 31. This was 35% more than a year ago. Net income rose 72% to $0.30 a share. This beat the consensus estimate by $0.07. Based on p/e and a number of other measures, APOL is a pricey stock. Yet, it is thriving because an increasing number of adults are realizing the necessity to further their education in order to advance their careers. Further, a slowing economy usually results in increased student enrollment. We believe Apollo provides a potentially profitable investment opportunity for those interested in this sector."

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