Strayer Education Inc. Stock Downgraded (STRA)

NEW YORK ( TheStreet) -- Strayer Education (Nasdaq: STRA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for STRAYER EDUCATION INC is rather high; currently it is at 52.30%. Regardless of STRA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STRA's net profit margin of 14.50% compares favorably to the industry average.
  • STRA, with its decline in revenue, slightly underperformed the industry average of 4.1%. Since the same quarter one year prior, revenues fell by 10.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Consumer Services industry and the overall market, STRAYER EDUCATION INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • STRAYER EDUCATION INC's earnings per share declined by 26.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, STRAYER EDUCATION INC reported lower earnings of $8.83 versus $9.70 in the prior year. For the next year, the market is expecting a contraction of 33.6% in earnings ($5.86 versus $8.83).
  • Net operating cash flow has significantly decreased to $6.18 million or 69.50% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

Strayer Education, Inc., through its subsidiary, Strayer University, provides post-secondary education services for working adults. The company has a P/E ratio of 7.5, below the average diversified services industry P/E ratio of 9.5 and below the S&P 500 P/E ratio of 17.7. Strayer has a market cap of $914.6 million and is part of the services sector and diversified services industry. Shares are down 24.9% year to date as of the close of trading on Tuesday.

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

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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