With the improvement in the employment situation in the U.S., more and more students are lapping up whatever job offers they get. However, the wages are still low. It will take some time for students to realize that better education and skills will improve their career prospects in the years to come, compared to the low skill or no skill jobs that they are currently engaged in. In this current scenario, while things are not as positive for some of the education companies, American Public Education continues to impress.
American Public Education, Inc. APEI is an online higher education company that focuses on serving the military and public service communities. The company operates through two segments, American Public University System, Inc. (APUS) and Hondros College, Nursing Programs (HCON).
Now let’s take a closer look to understand why this education company is worth buying.
Good Rank and Solid Growth Score
American Public Education has a Zacks Rank #1 (Strong Buy) and a favorable growth style score of ‘A.’ Back-tested results show that only stocks with a Growth Style Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
AMER PUB EDUCAT Price and EPS Surprise
AMER PUB EDUCAT Price and EPS Surprise | AMER PUB EDUCAT Quote
Positive Earnings Surprises and Share Price
American Public Education’s shares have gained about 29% year-to-date. Last quarter, the company reported a robust positive earnings surprise of 42.22%. Moreover, the company surpassed estimates in three out of the past four quarters, resulting in an average positive surprise of 20.58%.
Consistently Strong Results
American Public Education reported impressive earnings in the past two quarters. The bottom line exceeded guidance and investors’ expectations and increased in high double digits year over year for the past two quarters. This was driven by lower bad debt expenses, lower share count and stronger margins. The company’s focus on improving student persistence has reduced bad debt expense and led to higher margins. This is likely to drive earnings in the near term as well.
Strategic Initiatives to Drive Growth
American Public Education has undertaken several initiatives to improve enrollment trends at APUS and student persistence. The company intends to drive student’s persistence rate by improving the quality of the student mix, release of new tools for students and other initiatives that increase students’ engagement and classroom interactivity. Important initiatives include the APU mobile app and Civitas. The app provides students better access to classroom resources. Civitas is a predictive analytics tool that increases faculty and advisor engagement with at risk students, thereby improving persistence. The company believes that improved students persistence will lead to improved online learning experience, increased graduation rates and higher referral rates.
The company has adopted a geographical approach to marketing, which focuses on using cost-effective channels and aims to reach out to college ready students who are more likely to succeed.
Affordable Low Cost Tuition Contributing to Overall Growth
American Public Education’s programs are affordable. Despite the recent hike in fees, the APUS programs cost 19% less for undergraduate students and 38% for graduate students in comparison to programs at an average public university, as claimed by the College Board 2015 Trends in College Pricing and the National Center for Education Statistics Digest of Educational Statistics 2013-14 (graduate). The affordability of the company’s courses and programs will benefit the company in the long run.
Other Stocks to Consider
Investors interested in the consumer discretionary space may also consider Mohawk Industries Inc. MHK, Lincoln Educational Services Corporation LINC, and ITT Educational Services Inc. ESI. All the three companies hold a Zacks Rank #2.
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