DeVry Inc. (NYSE:DV) was up over 16% earlier this month on better than expected quarterly earnings. The for-profit education company has seen its stock soar over 55% the last six months. Are there still opportunities for this education company to go higher? Maybe not, but I believe there is one company in the industry that could be a solid buy.
DeVry’s recent run up was a result of higher profits, thanks in part to lower costs. Its quarterly earnings were up to $50 million, or $0.78 per share, from $9 million, or $0.13 per share for the same quarter last year. This number beat analysts’ expectations handily, which were $0.56 per share. This positive news comes despite the company’s struggles with poor enrollment growth, which has previously played a key role in the EPS growth (sequentially) of 26%, 24%, 56%, and 41% in the prior four quarters.
Like I said, I don’t think DeVry is the best play in the for-profit higher-education industry, and when looking at the company’s valuation this becomes even clearer:
| Price to Earnings (next year earnings) | Price to Sales | |
| DeVry (NYSE:DV) | 11.5 | 0.95 |
| American Public Education (NASDAQ:APEI) | 15.2 | 2.36 |
| Apollo Group (NASDAQ:APOL) | 7.9 | 0.56 |
| Corinthian Colleges (NASDAQ:COCO) | 7.7 | 0.13 |
| Strayer Education (NASDAQ:STRA) | 12.1 | 1.27 |
Apollo Group Inc (NASDAQ:APOL) is my pick as the best stock in the industry and a potential buy for investors. It is one of the cheapest stocks in the industry, on both a price to earnings and price to sales basis. Meanwhile, it has better expected growth than top competitors DeVry and Strayer Education Inc (NASDAQ:STRA) :
| 5-Yr. Expected EPS Growth (Wall Street estimates) | |
| DeVry | 8.90% |
| American Public Education | 15.50% |
| Apollo Group | 10.20% |
| Corinthian Colleges | 17.70% |
| Strayer Education | 9.50% |
Although Corinthian Colleges Inc offers investors solid growth opportunities at an attractive valuation, the company is fundamentally different from online educators, where it operates campuses across the country. As a result, Corinthian has returns (ROI and ROE) that is subpar to some of the major operators. Recent quarterly results for Corinthian showed total new students enrollment fell by 4% year over year.
Digging even deeper, DeVry has been struggling with respect to return metrics:
| Return on Investment | Return on Equity | |
| DeVry | 10.80% | 11.40% |
| American Public Education | 27.30% | 20.00% |
| Apollo Group | 29.90% | 38.60% |
| Corinthian Colleges | 4.70% | 5.60% |
| Strayer Education | 47.10% | 131% |
American Public Education, Inc. (NASDAQ:APEI) also operates in the industry as one of the smaller online educators, with a sub-$1 billion market cap. The company reported recent third quarter 2012 earnings of $0.60 per share, beating consensus estimates of $0.50. Total revenue was also up 18% year over year. Although American Public Education has performed well, its valuation is now at the top of the industry.
