One of the few optimistic voices for the sector is that of Morningstar analyst Liang Feng, who, in writing about the prospects for the Washington Post's (WPO) Kaplan educational division, which generated $150 million in operating profits for the company last year, said that "for-profit colleges will ultimately recover from near-term challenges, but normalized enrollment, in our view, could easily fall to half of peak 2010 levels before rebounding."
That's because "demand for technical degrees has outpaced supply, and state governments have reacted very slowly to increasing demand for post-secondary vocational education," and that's not likely to change given their budget constrictions, said Feng.
Here are summaries of seven stocks of for-profit schools arranged in inverse order of market value:
7. Corinthian Colleges (COCO)Company profile: Corinthian, with a market value of $315 million, is a for-profit education firm with more than 110,000 students and operates 118 schools, offering everything from diploma programs to master's degrees at locations in the U.S. and Canada. Investor takeaway: Its shares are up 76% this year and have a three-year, average annual loss of 40%. Analysts give its shares one "buy" rating, 10 "holds," one "weak hold," and one "sell," according to a survey of analysts by S&P. S&P, which has its shares rated "hold," says "steep loan defaults among its former students and the very high proportion of its students using the government's Title IV loans have put (it) at risk of not complying with government regulations, although (it) recently said it thinks its risks in these areas have been greatly reduced." It also said it thinks Corinthian's enrollment drop has bottomed. 6. Career Education Corp. (CECO) Company profile: Career Education, with a market value of $464 million, offers everything from certificate programs to doctoral degrees and has over 100,000 enrolled students. It operates more than 90 campuses in the U.S. and other countries. Investor takeaway: Its shares are down 13% this year and have a three-year, average annual loss of 32%. Analysts give its shares eight "holds" and five "weak holds," according to a survey of analysts by S&P. S&P has its shares rated "sell," and says its greatest challenge is related to the discovery of improper job rates at some campuses, the concurrent resignation of its president and CEO, and its subsequent receipt of a letter from its accreditor asking it to present reasons why its accreditation should not be suspended. There has yet to be a ruling on that. It's due to release earnings May 1.
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