American Public Education (APEI) has carved a unique niche for itself in the online post secondary education industry by focusing on recruits serving the U.S. military as well as federal, national, and local law enforcement personnel.
Moreover, the company’s part-time programs are well suited to irregular and extended work schedules of these personnel with limited financial recourses who travel and relocate frequently. This provides a significant upside potential for the company.
American Public has witnessed an impressive revenue growth over the last four fiscal years. During 2007-2010, revenue surged from $69.1 million to $198.2 million, recording a compound annual growth rate of 42% driven by high student satisfaction and referral rates, regional accreditation, and access to Title IV programs. Furthermore, management expects revenue to rise approximately 28% in second-quarter 2011.
The company’s sustained efforts to expand educational programs help it to boost enrollments. Net course registrations rose 31% and net course registrations from new students climbed 37% in first-quarter 2011. Management forecast net course registrations to rise approximately 25% and net course registrations from new students to jump approximately 27% in second-quarter 2011.
The company now is primarily focusing on increasing net registrations from civilian students, to safeguard itself from the adverse impact of a fall in military registrations due to increased military operations.
We observe that American Public’s projection of growth in student enrollments for second-quarter 2011 comes despite the regulation proposed by the Department of Education that may weigh upon students’ enrollments and the company’s profits.
The Department of Education proposed that an educational program could only qualify for Title IV funds, if it helps in achieving gainful employment, which includes the criteria of loan repayment rate and debt-to-income ratios.
The company derives a major portion of its revenue from federal student financial aid programs — the Title IV programs. The education institutions are also under the scanner due to the rise in the default rate of student loans.
Another for profit education company, Capella Education Company (CPLA) cautioned that new enrollment in second-quarter 2011 is expected to tumble by 40%. To counter sluggishness in students’ enrollment, education companies are resorting to restructuring their cost base.
Capella said that it lowered its headcount by about 120 non-faculty workforces and incurred a charge of about $1.9 million for the same in the quarter. Management hinted that the eliminations will result in cost savings of approximately $12 million to $12.5 million per year.
Currently, we have a long-term ‘Neutral’ rating on the stock. However, American Public holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
AMER PUB EDUCAT (APEI): Free Stock Analysis Report
Be the first to comment