Harvard Is Schooled by DeVry, Apollo

Since Apollo and DeVry obtain funding from public markets and operating efficiencies instead of significant investment holdings, they have avoided the meltdown siphoning away working capital.

What's more, tuition payments have started to become shaky for major universities as family finances have hit the skids. Tuition at a private university can be as much as four times that of online programs. Even most public institutions are more expensive. More affordable online universities are becoming increasingly appealing due to relatively lower costs.

Long thought to be inferior to brick-and-mortar institutions because of a lack of exceptional faculty and students, online institutions such as DeVry University and the University of Phoenix may be able to poach renowned faculty members from prestigious universities by offering unmatched salaries. Where the best professors go, the best students are sure to follow.

There may soon be a tipping point where these institutions break into the mainstream and start seriously competing for the mainstream of potential college freshmen.

These trends can be seen in new undergraduate enrollment growth rates boasted by DeVry University. The college recorded a 14.4% increase in new enrollments in 2007-2008 from the previous school year. That led to third-quarter revenue growth of 21.3% from the same period a year earlier.

Beyond this, it should be noted that both Apollo and DeVry carry no long-term debt. This leaves plenty of room to expand financing with debt issuance to help fuel growth while preserving strong returns on equity. DeVry and Apollo have returns on equity of 64.92% and 18.25%, respectively.