Why Strayer Education (STRA) Stock Is Down On Thursday

NEW YORK (TheStreet) -- Shares of Strayer Education Inc. (STRA) are lower by -4.50% to $53.06 in afternoon trading on Thursday as education stocks take a hit following Corinthian Colleges' (COCO) announcement it is facing limited access to federal funds and the possibility of a severe liquidity shortage, the Wall Street Journal reports.

The for profit post-secondary education company's financial trouble has raised doubts as to whether or not it can continue as a company, the Journal added.

Federal financial aid for Corinthian Colleges has been placed under scrutiny by the U.S. Department of Education due to delays, on the part of the company, in responding to requests for information.

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If the DOE does not grant the company its request for relief it will be forced to look for funding from other sources. Corinthian's past attempts to gain loans have been unsuccessful, the company told the Journal.

Shares of Corinthian Colleges are down -63.62% to 30 cents today. Other stocks affected include Career Education Corp. (CECO) down -8.61% to $4.88, DeVry Education Group Inc. (DV) lower by -1.73% to $43.10, and Education Management Corp. (EDMC) down -3.68% to $1.83.

Separately, TheStreet Ratings team rates STRAYER EDUCATION INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate STRAYER EDUCATION INC (STRA) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and relatively poor performance when compared with the S&P 500 during the past year."

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

  • Net operating cash flow has slightly increased to $33.22 million or 5.81% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -18.00%.
  • The gross profit margin for STRAYER EDUCATION INC is rather high; currently it is at 54.23%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.69% trails the industry average.
  • STRA, with its decline in revenue, underperformed when compared the industry average of 1.5%. Since the same quarter one year prior, revenues fell by 15.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, STRA has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • 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 decreased by 14.2% when compared to the same quarter one year ago, dropping from $17.23 million to $14.78 million.
  • You can view the full analysis from the report here: STRA Ratings Report
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