Apollo Group: Best of Breed and Becoming Attractive (APOL, CECO, COCO)

Apollo Group Inc. (APOL), the education company that owns the University of Phoenix among other institutions, is a business we’d like to own.

With a $9 billion market cap, Apollo towers over competitors such as Career Education Corp (CECO) whose market cap is $3.6 billion and Corinthian Colleges (Nasdaq: COCO) at $1.2 billion. An economy of scale is a competitive advantage in this industry.

Besides being the biggest, APOL is also the best, at least in our view. Its margins and returns far outpace most of its competitors. Apollo’s University of Phoenix is the company’s crown jewel and the envy of the industry.

The balance sheet is heavy on cash and light on debt. Insiders own a large stake in the company. There’s a lot to like and we’re buyers—at the right price.

Despite trending mostly downward since mid-2004, APOL’s share price has only adjusted to reality from a nosebleed valuation rather than enter the deep bargain bin. Slowing growth and some other issues have soured some investors. At a recent price of $52.92, shares are far from the 52 week high of $82.54.

Shares of APOL have been volatile today and are up 2% at this writing despite being down earlier. We’ll be watching and if the company slips, probably buying.

APOL 1-yr chart:

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