Why Education Management (EDMC) Stock Was Down Today

NEW YORK (TheStreet) -- Education Management Corporation (EDMC) was down 6.9% to $4.58 at the close on Wednesday.

The education provider announced that it was laying off 200 employees and selling one of its Pittsburgh office buildings.

The sale of the Art Institute of Pittsburgh building will bring in about $10 million to the company.

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The school has been the target of federal regulator who have questioned the school's bad debt expenses.

Read more: http://www.washingtontimes.com/news/2014/apr/2/education-management-corp-sells-pa-building/#ixzz2xlTiAbIh
Follow us: @washtimes on Twitter

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 a number of negative factors, 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, generally high debt management risk and weak operating cash flow."

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 96.5% when compared to the same quarter one year ago, falling from $31.14 million to $1.09 million.
  • The debt-to-equity ratio is very high at 5.01 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 1.48, demonstrating the ability to handle short-term liquidity needs.
  • Net operating cash flow has decreased to -$87.52 million or 38.03% when compared to the same quarter last year. Despite a decrease in cash flow of 38.03%, EDUCATION MANAGEMENT CORP is still significantly exceeding the industry average of -131.98%.
  • 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.
  • 42.45% 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, EDMC's net profit margin of 0.18% is significantly lower than the industry average.
  • You can view the full analysis from the report here: EDMC Ratings Report
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