Has Apollo Group Inc (APOL) Become the Perfect Stock?

Throughout the for-profit education industry, companies have gotten hit hard by the threat of greater government regulation. Last summer, the Department of Education said it planned to review recent paperwork from Apollo to make sure it followed federal financial aid rules. Other companies have undergone similar investigations, with ITT Educational Services , Inc. (NYSE:ESI) and Corinthian Colleges Inc (NASDAQ:COCO) both having had to endure a Consumer Financial Protection Bureau examination, while Bridgepoint Education Inc (NYSE:BPI) was the subject of a Justice Department inquiry.

By some measures, though, Apollo’s University of Phoenix has seen the biggest impact, as enrollment figures for the leading educator have fallen dramatically. As of its most recent quarterly figures, Apollo had suffered a 14% drop in total enrollment — or more than 50,000 students — with new enrollment figures down 15%. Corinthian and ITT have also seen declines, although Bridgepoint actually gained students last year.

Unfortunately, Apollo has drawn criticism for boosting its marketing budget to try to get enrollment back up. With University of Phoenix’s online ad spending topping the industry on two recent looks during December and January, fellow Fool Kevin Chen fears that Apollo and its peers mistakenly believe that marketing can build enrollment even in a tight job market in which the payoff from a degree isn’t guaranteed.

For Apollo to improve, it needs to get past the threat of regulation and seek ways to come up with a more palatable business model for students, regulators, and the company. With shares at such low levels, success could result in a huge payoff for shareholders — but failure could be fatal to Apollo’s chances of ever approaching perfection.

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The article Has Apollo Group Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger owns shares of Bridgepoint Education. The Motley Fool recommends Bridgepoint Education. The Motley Fool owns shares of Bridgepoint Education.

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