Strayer Education Inc (STRA), Bridgepoint Education Inc (BPI), Apollo Group Inc (APOL): Should Investors Send For-Profit Education Stocks to Detention?

However, in situations like these it’s important to remember that a P/E ratio is a snapshot in time. The metric doesn’t provide context into the direction these stocks are taking. The fundamentals are deteriorating, meaning that the valuation multiples will soon expand. As earnings continue to crumble, the P/E ratios of each of these stocks will rise, making them less attractive than they currently seem.

None of these stocks pays a dividend to shareholders, which demonstrates the lack of confidence management teams within the industry have about their own businesses. Strayer Education Inc (NASDAQ:STRA) University had paid a generous dividend of $4.00 per share annualized as recently as November 2012. However, the company suspended its dividend as a result of its deteriorating financial position.

Shares of for-profit education stocks may rally from time to time, but don’t be fooled: there are severe structural problems facing the entire industry. Student enrollments are declining, and until that trend reverses there is little reason to invest in for-profit education. Huge risks abound in the industry, and investors would be wise to avoid the sector entirely.

The article Should Investors Send For-Profit Education Stocks to Detention? originally appeared on Fool.com is written by Robert Ciura.

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