The for profit education industry has found itself in the crosshairs (welcome to the club) of the current administration and the stocks within the sector have been some of the poorest performers in the market over the last year. One stock in the sector, American Public Education (APEI), looks like it is the 'baby that got thrown out with the bathwater". The company has a slightly different and hopefully more insulated business model in that it serves primarily the military and public service (two political favorites) communities. It also just reported solid earnings and has had a major insider buy recently. Intrepid investors looking to put money to work in this unloved sector should give it strong consideration.
Key highlights from earnings report:
- Earnings came in at 51 cents a share, beating consensus estimates by six cents a share.
- Revenues also beat estimates coming in at $74.6mm, better than the $72mm expected
- The company did say that it expects student sign ups to be flat in the third quarter compared with 4% growth in the second quarter.
American Public Education together with its subsidiary, American Public University System, Inc., provides online postsecondary education focusing on the needs of the military and public service communities. (Business description from Yahoo Finance).
Four reasons APEI is a solid value pick at for growth investors at under $28 a share:
- A director of the firm picked up over $3mm worth of shares in two transactions in May and June.
- The company has over 25% of its market capitalization represented by the over $125mm in net cash on its balance sheet.
- The company has now beat earnings estimates for five straight quarters and is selling for less than 11 times forward earnings, a steep discount to its five year average (28.3).
- The 9 analysts that cover the stock have a median price target of $39 a share on the stock. The sector should benefit greatly if the November elections result in a change of leadership and "for profit" comes back into vogue.