Rating Change #3

Apollo Group Inc ( APOL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, notable return on equity, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 328.12% and other important driving factors, this stock has surged by 38.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, APOL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Consumer Services industry. The net income increased by 360.4% when compared to the same quarter one year prior, rising from $40.97 million to $188.61 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Diversified Consumer Services industry and the overall market on the basis of return on equity, APOLLO GROUP INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • The gross profit margin for APOLLO GROUP INC is rather high; currently it is at 60.90%. Regardless of APOL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, APOL's net profit margin of 16.80% compares favorably to the industry average.
  • APOLLO GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, APOLLO GROUP INC increased its bottom line by earning $4.02 versus $3.69 in the prior year. For the next year, the market is expecting a contraction of 14.9% in earnings ($3.42 versus $4.02).

Apollo Group, Inc., through its subsidiaries, provides online and on-campus educational programs and services at the undergraduate, master's, and doctoral levels. The company has a P/E ratio of 13.2, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Apollo Group has a market cap of $6.72 billion and is part of the services sector and diversified services industry. Shares are up 0.4% year to date as of the close of trading on Thursday.

You can view the full Apollo Group Ratings Report or get investment ideas from our investment research center.

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