How Well Does Education Sell?

American Public Education (NASDAQ: APEI), Right industry, Right Time

American Public Education (NASDAQ: APEI), Right Industry, Right Time

American Public Education (NASDAQ: APEI), Right Industry, Right Time

There is an ongoing disruptive innovation in the educational industry. Around 20 years ago, a simple correspondence course started out as an alternative to traditional education system. This later transformed into an online learning course. At present, online learning providers are finding innovative ways to create a school-like environment.

According to industry pundits, 25 million college students will be taking their classes online by 2016. This means that online education stocks face strong tailwinds moving forward. An example of a solid play in this sector is American Public Education (NASDAQ: APEI). APEI is a provider of online secondary education, specifically serving military and public service communities.  Its system operates through two universities: American Military University and American Public University. It has 87 degree programs and 69 certificate programs in disciplines related to national security, military studies, intelligence, homeland security, criminal justice, technology and business administration.

It recently announced its third quarter results for the current fiscal year. Revenues came in at $77.1 million, 18% higher than the previous year. This puts its 9-month revenues at $227.5 million, an increase of 23% compared to the same period last year. Net income amounted to $10.9 million or $0.60 per share diluted earnings for the third quarter of 2012. From these results, net income for 9 months is at $29.1 million or $1.61 diluted per share. At run-rate, APEI would post full year earnings per share of $2.14, slightly lower than the consensus estimates of $2.25 per share. However, the company expects earnings per share to move from $0.64 to $0.67 for the fourth quarter, which would beat expectations.  

Over the last month, its stock has declined by around 14%. It seems that the bearishness is due to the cautious outlook of the educational stocks in general.  Considering cheap valuations and a high growth potential (1.5X higher than the industry), it would be a good idea for long-term investors to check out this company now.


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