These Two Education Companies Are Down Today

NEW YORK (TheStreet) -- Career Education (CECO) and Education Management (EDMC) fell Monday after the for-profit education companies confirmed they received inquiries from several states regarding its business practices.

Career Education fell 3.1% to $5.88, while shares of Education Management dropped 7.3%to $8.96.

Both companies said they received the inquiries in regulatory filings. The inquiries ask about their practices that relate to recruiting students, graduate placement statistics, graduate certification and licensing, and student lending, among others.

Career Education says it received the inquiries on Friday. Education Management did not say when it received the questions. Both companies say they will cooperate with all states involved.

TheStreet Ratings team rates CAREER EDUCATION CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAREER EDUCATION CORP (CECO) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 162.7% when compared to the same quarter one year ago, falling from -$33.15 million to -$87.06 million.
  • Net operating cash flow has significantly decreased to -$10.87 million or 168.27% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • CAREER EDUCATION CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAREER EDUCATION CORP reported poor results of -$2.09 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings (-$1.48 versus -$2.09).
  • 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. Compared to other companies in the Diversified Consumer Services industry and the overall market, CAREER EDUCATION CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CAREER EDUCATION CORP is rather high; currently it is at 60.19%. Regardless of CECO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CECO's net profit margin of -34.64% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: CECO Ratings Report


TheStreet Ratings team rates EDUCATION MANAGEMENT CORP as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate EDUCATION MANAGEMENT CORP (EDMC) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has decreased to $127.21 million or 18.75% 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.
  • The debt-to-equity ratio is very high at 5.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, EDMC's quick ratio is somewhat strong at 1.20, demonstrating the ability to handle short-term liquidity needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Consumer Services industry and the overall market, EDUCATION MANAGEMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • EDMC, with its decline in revenue, slightly underperformed the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 4.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 38.52% is the gross profit margin for EDUCATION MANAGEMENT CORP which we consider to be strong. Regardless of EDMC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.63% trails the industry average.
  • You can view the full analysis from the report here: EDMC Ratings Report

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