Corinthian Colleges (NASDAQ:COCO) has been one of the most surprising and top performers in the stock market in 2012, already more than doubling year to date. The main catalyst behind the stock's rise has been the earnings report that revealed that enrollment and revenues did not fall as much as expected. Two of the valuation metrics suggest that the stock is undervalued while analysts suggest that the stock is overvalued.
However, as seen earlier this year, analysts haven't been very good in projecting the company's results. With the valuations as low as they are, and despite the stock rise, the stock may be worth a shot here at a forward P/E ratio of 8.5. Note, as with all companies in the for profit education sector, the political factor is always a risk. Here I take a closer look at the valuation metrics and analysts projections:
Valuation: Corinthian College's trailing 5 year valuation metrics suggest that the stock is undervalued as all three of the metrics are below their respective 5 year averages. Corinthian College's current P/B ratio is 0.8 and it has averaged 2.1 over the past 5 years with a high of 3.7 and low of 0.2. Corinthian College's current P/S ratio is 0.3 and it has averaged 0.8 over the past 5 years with a high of 1.5 and low of 0.1. Corinthian College's current P/E ratio is 31.5 and it has averaged 54.2 over the past 5 years with a high of 203.6 and low of 4.2.
Price Target: The consensus price target for the analysts who follow Corinthian College is $4. That is downside of 15% from today's stock price of $4.78 and suggests that the stock is overvalued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: Corinthian College is currently trading at about $5 a share with analysts expecting EPS of $0.56 next year, an earnings increase of 75% y/y, for a forward P/E ratio of 8.5. Taking a look at the company's publically traded comparisons will give us a better idea of the stock's relative valuation. Strayer Education (NASDAQ:STRA) is currently trading at about $116 a share with analysts expecting EPS of $7.09 next year, an earnings decline of 20% y/y, for a forward P/E ratio of 16.3.
Bridgepoint Education (NYSE:BPI) is currently trading at about $26 a share with analysts expecting EPS of $2.84 next year, an earnings decline of 5% y/y, for a forward P/E ratio of 9.3. Capella Education (NASDAQ:CPLA) is currently trading at about $39 a share with analysts expecting EPS of $3.19 next year, an earnings decline of 9% y/y, for a forward P/E ratio of 12.4. The mean forward P/E of Corinthian College's competitors is 12.7 which suggests that Corinthian College is undervalued relative to its publically traded competitors.
Earnings Estimates: Corinthian College has beat EPS estimates 3 times in the past 4 quarters. The company's EPS figures have come in between 0 cents and 3 cents from consensus estimates or about 0% to 300% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Top Stock Holders: The top two funds that own Corinthian College are Wells Fargo Advantage Small Cap Value, which owns 5.7 million shares or 6.68% of the shares outstanding, and Royce Low Priced Stock, which owns 5.2 million shares or 6.17% of the shares outstanding. The top two institutions that own Corinthian College are Wells Capital Management, which owns 8.5 million shares or 9.98% of the shares outstanding, and Goldman Sachs Asset Management, which owns 8 million shares or 9.41% of the shares outstanding.
Price Action: Corinthian College is up 4.5% over the past year, outperforming the S&P 500, which is up 3.4%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $3.27 and above its 200 day moving average, which sits at $2.52.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.