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Bridgepoint Education (BPI) has put together a number of positive earnings surprises. The stock has risen to a Zacks Rank No. 4 (Sell) and is the Bear of the Day.

Super Run-Up

The stock has run up quite dramatically over the past six weeks. The stock is up more than 20% since the start of May, but at the same time, earnings estimates have been moving in the opposite direction.

Company Description

Bridgepoint Education provides postsecondary education services. Its academic institutions, Ashford University and University of the Rockies, offer associate's, bachelor's, master's, and doctoral programs in the disciplines of business, education, psychology, social sciences, and health sciences. The company was formerly known as TeleUniversity, Inc. and changed its name to Bridgepoint Education, Inc. in February 2004. Bridgepoint Education, Inc. was founded in 1999 and is headquartered in San Diego, Calif.

Not-So-Good Earnings History

Looking to the earnings history, I see a stock that has missed the number in two of the last three reports and posted an earnings meet in the other instance. The September 2012 quarter came in 17% below expectations, and the following quarter was a negative earnings surprise of 3.3%.

Estimates Trend Lower

Estimates for BPI have slid over the past several months. The Zacks Consensus Estimate for 2013 stood at $2.21 in August 2012. Over the next several months, estimates moved from that level to $2.13 in October to $1.55 in December and $1.28 in April, down to the $0.98 level analysts are currently calling for. That is a dramatic decrease.

The 2014 estimates have also been dropping. The Zacks Consensus Estimate was $1.42 in February, and has ripped lower to $1.01 in April and down to $0.61, where it sits today. The glaring indication of troubling times to come is apparent when you see that estimates for 2014 are lower than the current year.

Valuation

The valuation picture for BPI is one that looks good at first glance, with a trailing P/E of 6x and forward multiple of 13x; both measures are well below the industry average. The price to book of 1.3x is also less than half the 3.0x industry average. But the devil is in the details here, with revenue declining 18.5% in 2013 and expected to be 8.6% lower again in 2014. EPS is also declining at a 57% rate for 2013 and 38% for 2014, compared to an industry average increase of 5% in 2013 and 13% in 2014. So the valuation is moving lower as the company slips behind the industry rate of growth of earnings.

The Chart

The chart for BPI looks pretty good right now, but the 20%+ move from the start of May to the $13 level the stock is currently at is simply not supported by the fundamentals. With estimates moving lower, investors will see that this is a stock they do not want to hold in their portfolios until the earnings turn around.

Bridgepoint Education: Free Stock Analysis Report (email registration required).

Source: Bear of the Day: Bridgepoint Education