Bridgepoint Education exhibited the same problem when it released its third-quarter results. The company had new student enrollments of approximately 20,500, compared with new student enrollments of approximately 22,000 for the same period in 2011, a decrease of 6.8%.
Apollo also revealed enrollment declines in its quarterly report. New degree enrollment dropped 15%, and total existing enrollment fell by 14% versus the prior year’s quarter.
The Ugly
Unfortunately, strong balance sheets and alleviated concerns regarding Pell Grants can’t entirely protect for-profit education investors from severely declining financial performance, which has been atrocious recently. Strayer was once a high-yielding dividend stock. As recently as a few months ago, the company paid a quarterly dividend of $1.00 per share and yielded 4% or more. Unfortunately, the high dividend yield could only temporarily mask the underlying fundamental deterioration of Strayer’s business. The company reported poor full-year fiscal 2012 results. Revenues for the year ended Dec. 31, 2012 decreased 10% year over year. Making matters worse, diluted earnings per share dropped 37% for the full year. The company suspended its dividend, and shares of Strayer have plummeted from over $100 per share to their current level of $52 in a matter of months.
On a positive note for Bridgepoint, revenue increased 6.5% during the first nine months versus the same period a year ago. Unfortunately, dramatically higher marketing and advertising expenses resulted in diluted earnings per share dropping 23% during the first three quarters. Shares of Bridgepoint have fallen along with its industry, collapsing from the mid-twenties at the beginning of 2012 to its current level of just $10 per share.
Apollo reported 2013 first-quarter revenue dropped a further 10%, after revealing that full-year 2012 revenue declined 10% as well. Fiscal 2012 net income dropped more than 22% from fiscal 2011. Shares of Apollo have followed suit, losing more than two-thirds of their value after climbing to over $57 per share in early 2012.
The Bottom Line
On the bright side, these stocks aren’t expensive. In fact, assuming revenue and profit figures for these companies don’t downright collapse, you could make the argument that shares of these stocks are cheap. However, that’s a fairly big assumption considering the problems surrounding the industry, including deteriorating financial performance and dropping enrollments.
Despite cheap valuations, there’s no escaping the fundamental problems that could prove to be disastrous for these stocks. Until these companies can get revenues, profits, and enrollments going in the right direction, you should give them failing grades.
The article Taking For-Profit Education Stocks to School originally appeared on Fool.com and is written by Robert Ciura.
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