The firm said it lowered its rating on the education services provider based on worsening trends in the U.S. for profit industry, and its belief that it doesn't see how the market will change its negative view on DeVry undergrad.
Deutsche Bank cut its price target on DeVry to $34 from $40.
"With trends across the U.S for profit industry getting worse, it's hard to see how the market will change its negative view on DeVry undergrad. Our Sept. upgrade on DeVry was based on continued positive trends at the three key growth assets, which did not play out. We now cut to hold, despite the drop in the stock price, as we don't see what changes in the coming quarters to give investors the confidence to re-rate the stock," the firm said in an analyst note.
Shares of DeVry closed at $31.86 on Friday afternoon.
Separately, TheStreet Ratings team rates DEVRY EDUCATION GROUP INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DEVRY EDUCATION GROUP INC (DV) 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 largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DV has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.41, which illustrates the ability to avoid short-term cash problems.
- 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 on the basis of return on equity, DEVRY EDUCATION GROUP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $117.06 million or 22.00% when compared to the same quarter last year. Despite a decrease in cash flow of 22.00%, DEVRY EDUCATION GROUP INC is still significantly exceeding the industry average of -186.26%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 26.43% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, DV is still more expensive than most of the other companies in its industry.
- You can view the full analysis from the report here: DV Ratings Report