Forget the Ivy League — today’s budget-conscious and time-conscious students are turning to the E-vy League, schools that operate primarily online or with a strong online element. However, education is a tricky endeavor to quantify, as any teacher could tell you. Let’s take a look at three companies with potential and vet their prospects for your portfolio.
A decent inroad to the Chinese economy
Unfortunately, New Oriental Education & Tech Grp (ADR) (NYSE:EDU) has run into some issues.
The Educational Testing Service sued New Oriental Education & Tech Grp (ADR) (NYSE:EDU) for plagiarizing past test questions for teaching purposes without obtaining consent. This resulted in a fine and may speak of a shady corporate culture at new Oriental that investors should be wary of. The Fool reported on this company in 2011, and the earnings appear to have caught up enough to drive the earnings multiple down to the 25 range. While not ideal, considering the massive demand for many Chinese stocks this could constitute a decent price. If you’re okay with the potential for more bad news if New Oriental Education & Tech Grp (ADR) (NYSE:EDU) tries to inflate its students’ acceptance rate by using past test questions again, this is a potentially decent buy.
Possibly the best educational deal there is
Strayer Education Inc (NASDAQ:STRA) is something of an underrated cash cow. In 2009, the company spent $1,300 per student for instruction, but spent $2,500 per student in its marketing efforts in the process of making $4,500 per student in profit. That sounds like a decent business model, considering how many people want to advance their careers and look to education to make that happen. More recently, Strayer’s margins are still a strong 10.8% trailing. The company is also a pretty good deal, trading at around 10 times its earnings.
Strayer Education Inc (NASDAQ:STRA) has taken a lot of flack for paying its executives many times what other educational institutions pay their presidents and other faculty. While the recession is over and more people will likely be taking their degrees to work, Strayer’s method of keeping costs down through having most of its students be online appears to be working well.