Triple Play: Educated Gains

05/02/2003 12:00 am EST

Focus:

Adult education, online Internet courses, and schools geared to career changes and advances are becoming an  increasingly popular area both for those seeking to advance in their work lives, as well as investors looking to benefit from this ongoing trend.  Here are a number of assessments on opportunities in this field.

Kennedy, Kevin"EVCI Career Colleges (EVCI NASDAQ) is the latest 'super 7 stock' from Kevin Kennedy's Coolcat Report.com. "The firm owns and operates Inter-borough Institute, an institution accredited at four locations within the Metropolitan New York area. EVCI has successfully changed its focus from a broadband telecommunications and e-learning company with virtual classrooms to an owner of post-secondary institutions with site-based classrooms. It plans to grow by expanding its existing campuses, adding new academic programs and developing new campus locations. The company meets all of our criteria for a 'Super 7 Stock,' including relative strength of 97 or higher float ten million shares or less, a new high in the previous two weeks, three times previous day volume and up in price day in past two weeks and a breakout out of a base of four weeks or longer in the past two weeks."

Navellier, Louis" Apollo (APOL NASDAQ) will soon be a large-cap stock; it now has a market value of $9.4 billion by running for-profit schools for working adults," says Louis Navellier, editor of the Blue Chip Growth Letter. "Apollo also operates the University of Phoenix and has over 150,000 students and 126 campuses in 26 states. Catering to adults between careers (the average student is 35), the University of Phoenix prospers through tough economic times. Tuition ranges from $7,000 to $12,000 per year, which is substantially lower than private colleges. The college generates over $1 billion in annual revenues with 16% historical after-tax operating margins. In the latest quarter, net margins rose to 25%, dramatically exceeding analyst expectations.  The key was the online division, which offers degree programs in 'virtual classrooms'. over the Internet. The firm expects margins to expand to 30% due to a rising number of online students. Overall, this is a great way to profit from the sputtering economy's current woes." 

Gooley, KevinAccording to Financial Advisor magazine ( www.myfinancialadvisor.com ), Janus Fund manager Blaine Rollins has recently taken a position in Apollo, a "newcomer to the fund and operator of the University of Phoenix online degree program and owner of the College for Financial Planning."  He adds, "I want to own companies that are gaining market share and have great franchises because they are capable of generating better long-term earnings growth than the overall market.  And indeed, right now we are seeing some opportunities to buy some great growth franchises.  Apollo has substantial free cash flow and offers students a reasonably priced education option while maintaining solid margins."

Gooley, Kevin"One of the nation's largest, for-profit higher education companies, Corinthian Colleges (COCO NASDAQ) operates a total of 66 campuses in 21 states as of February," notes Kevin Gooley of Standard & Poor's The Outlook . "The company's degree and diploma programs are concentrated in popular fields including healthcare, business, information technology, criminal justice, and automotive repair. It also offers online courses at 23 of its campuses. Corinthian initially concentrated on obtaining established for-profit education campuses, but since its initial public stock offering in early 1999, has also opened new campuses. From its initial public offering through this February, Corinthian has opened 14 new campuses and has added 19 campuses and two training centers through takeovers. We expect strong profit growth to continue because of the company's aggressive expansion effort, plus concentration of its educational offerings in attractive career markets. We forecast 45% sales growth in fiscal 2003 (ending June). With margins likely to be aided by the leveraging of costs at Corinthian's expanding school base, we forecast a 55% gain in per-share profits to $1.35. We see $1.70 in fiscal 2004. Although trading at an above-market 23 times our fiscal 2004 estimate, the shares have great appeal for capital appreciation, as their earnings multiple is on a par with the company's likely growth rate for the next several years. The shares have our top investment ranking."

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