Dykstra: Go to School With Apollo Options

As the kids trundle off to school, let's see if we can't get an education in education stocks.

Higher education has become big business, and Apollo Group's(APOL Quote) tag line says it all: the company is "the leading brand in higher education." Through its subsidiaries -- the University of Phoenix (which includes the University of Phoenix Online), the Institute for Professional Development, the College for Financial Planning and Western International University -- Apollo has established itself as the leading provider of higher education for working adults.

Apollo Group has enjoyed sustained growth in both student enrollment and financial growth, more than doubling total enrollments and revenue between 2001 and 2005. Their programs, designed around working adults, have literally changed the business model and course structure of higher education.

In addition, their schools are accredited, which allows students easy access to federally funded student loans and grants, creating a more stable income stream for Apollo and allowing more students to enroll.

Apollo is the largest for-profit educational company, with about 300,000 students. The company operates 259 campuses and learning centers in 39 states and various international locations. Programs range from associate degrees to doctorate degrees, with coursework in business, education, health care, technology and social and behavioral sciences.

I give Apollo an "A" in financial health, with a textbook balance sheet, a forward price-to-earnings ratio ratio of 20.48 and a staggering 52.72% ROE. It has big revenue, and best of all, has no debt and almost $600 million in cash on the balance sheet. No pop quiz is necessary to take advantage of this smart deep-in-the-money (DITM) call recommendation.

To make the grade and score a win, I will go all the way out to February and place a limit order to buy 10 February 45s (OAQBI) at $12.90 or better. Shares closed at $57.11 on Thursday.

Fielding Reader Email

Now it's your turn. I use every Friday as the day for all my loyal readers who give me the inspiration to dig in and keep pushing to find you winners day in and day out.