Apollo Group Inc (APOL) and More: Are There Profits To Be Made With For-Profit Education Stocks?

Page 1 of 2

As the economy continues to struggle and find some stable footing, many industries are naturally suffering. Restaurants find that less people eat out when they’re worried about their next paycheck, and retailers have pretty much the same observations. So where is an investor and fellow Fool supposed to put some money to work that seems to have the potential to beat the general market indices? One recession-proof industry has recently been higher education.

Apollo Group Inc (NASDAQ:APOL)The clamor for caps and gowns

As we saw in the last meltdown in the early 2000s — remember the dot-com collapse? — business actually picked up considerably for eductators. The higher unemployment went up, the more people felt that higher education would make them a better candidate for the next job opening.

Apollo Group Inc (NASDAQ:APOL)Career Education Corp. (NASDAQ:CECO)DeVry Inc. (NYSE:DV), and ITT Educational Services, Inc. (NYSE:ESI) were just a few of the many companies in the space that scorched higher for a good period there, as record revenues and profits led them higher. Unfortunately, one would think with the financial meltdown starting in late 2008, the good times would have continued for these companies again — but nothing could be further from the truth.

The federal government started to crack down on what they understandably saw as questionable student loan practices at best. The government has even been seriously considering withdrawing its massive subsidies from the for-profit education sector. As a result, all of these stocks have been hammered. When I looked deeper at two of them, I saw some nice Foolish value.

Cheers for Career Education

As previously stated, Career Education was one of the big winners a decade ago, with scorching profits and great prospects ahead of it. The company’s stock now, though, is a far cry from the $70 all-time high it reached back in 2004. It now sits approximately 95% lower, under $4 per share.

However, the company now looks well-priced for value investors. Its fantastic balance sheet has basically no debt, plus a net cash position exceeding $5.50 per share. That means the company is trading at less than 70% of its net cash, which would make even value legend and Motley Fool idol Benjamin Graham blush.

Operationally, Career has missed the last two quarters’ analyst estimates, but it did greatly exceed those same estimates in the previous two quarters prior to that. With Career trading at a paltry 0.1 times sales, and 0.3 times book value, I see the market’s negative sentiment more than priced into the stock.

Add in the potential for literally any good news to push the stock extremely higher (much like DeVry on Feb. 7), a strong possibility of an acquisition — the largest shareholder, Blum Capital, owns more than 20% of it already — and/or a resolution with the federal government, and I think Career Education is set to generate market-beating returns.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!