With the economy in a freefall, we've already read articles listing products and services consumers are most reluctant to relinquish: G3 cell-phone service, Botox injections and premium cable channels. TheStreet.com Ratings' stock-evaluation model has identified a more encouraging item: education.
Only three stocks enjoy the highest possible grade of A-plus from TheStreet.com Ratings' quantitative model, which evaluates a company's valuation metrics, current financial situation and analysts' expectations of future growth. Two of the A-plus stocks --
-- are in the field of adult education.
Americans are doing more than worrying about downsizings and how to survive on unemployment compensation. They are signing up for online and classroom programs to enhance their economic marketability.
The consensus among analysts is that, despite the hard times, DeVry's earnings will grow from $1.73 a share in fiscal 2008, which ended in June, to $2.21 this year and $2.76 in 2010. For Strayer, the consensus is for profit of $5.67 a share in 2008 to reach $7 this year and balloon to $8.74 in 2010.
A third buy-rated adult education stock -- the giant of the industry,
-- is included with DeVry and Strayer in the accompanying table.
Apollo Group is the parent of the Phoenix University system. The company is expected to expand its EPS from $2.87 for fiscal 2008, which ended in August, to $3.79 for the current year and $4.54 in 2010. The stock rates a "B," or a "buy," from TheStreet.com Ratings.
In addition to high marks, the three education stocks have handed investors healthy returns. DeVry has risen 18.7% in the past year, while Strayer has climbed 11.8% and Apollo Group has advanced 22.5%. So far this year, DeVry is down 7.8%, Strayer has fallen 18.1% and Apollo Group is little changed.
With strong balance sheets, the trio of education firms are well-positioned to finance growth, even during the recession. DeVry and Strayer are free of long-term debt, and Apollo's $30.9 million debt is miniscule compared with its $1.86 billion in assets.
Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.