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Brian Grosso

 
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  • Apollo: Unattractive Risk-Reward Proposition [View article]
    Depends how you value the shares and what you assume. I present my valuation and according to that, yes, you should not accept all this uncertainty without the upside that comes with buying around 14 or 15. Others have already given feedback saying that they think a multiple of 10 and FCF of $500-600M are more appropriate. If you believe that, then by all means buy at current levels.
    Jul 15 06:28 PM | Likes Like |Link to Comment
  • Apollo: Unattractive Risk-Reward Proposition [View article]
    I also agree that the Notice sanction is pretty immaterial. The issues are with governance and the chances of the company correcting whatever problem remains are pretty slim. Whatever damage this situation has done to UOP reputation is mostly in the past. The bigger issue and cause for uncertainty is enrollments. I was conservative in every aspect of my analysis because I knew I was making a huge assumption in saying that enrollments would recover by year end 2014. The 'sign' of stabilization that I refer to from the conference call is hardly encouraging but it is something. We really need to see a few more quarters to get a better idea of a recovery timetable.
    Jul 15 06:14 PM | Likes Like |Link to Comment
  • Apollo: Unattractive Risk-Reward Proposition [View article]
    I would argue that Capella Education is much better positioned to capitalize on the MOOC shift as it wholly owns a MOOC provider subsidiary 'Sophia'. I agree that right now, MOOCs are ineffective for the majority of learners but consider a MOOC business model similar to that of this very site I write on in which certified professors would act as independent contractors and submit self-produced educational materials to the MOOC and get compensated based on the popularity and effectiveness of their content. Students could sift and screen through all the materials and rate and describe the effectiveness and teaching styles of teachers to aid other students in their searches. I think it's closed-minded to assume MOOCs will be limited this limited in their effectiveness forever.
    Jul 15 06:09 PM | Likes Like |Link to Comment
  • Apollo: Unattractive Risk-Reward Proposition [View article]
    So the decline would actually be about $100M. You're right.

    In my valuation I use $250-300M as a sustainable FCF number post turnaround. Do you think the company is capable of more than that?
    Jul 15 06:01 PM | Likes Like |Link to Comment
  • Apollo: Unattractive Risk-Reward Proposition [View article]
    Too pessimistic or optimistic? Current FCF =$400M

    $400M + about $125M in cost savings - $550 due to lower revenues = -$25M FCF. I expect FCF to recover quickly after that but that's where I expect the bottom to be which isn't so bad.
    Jul 15 01:10 PM | Likes Like |Link to Comment
  • Apollo: Unattractive Risk-Reward Proposition [View article]
    Since 2009, the company's performance does not prove it to be a 10%+ grower. Analyst estimates going forward are 5.5%. The industry will likely be lower-margin, and more challenging to make money in in the years to come. New education technology called MOOCs present a serious threat to online educators like Apollo's business. The company is also extremely large at this point and so it will have more trouble growing at a high rate than its smaller competitors. There are a lot of headwinds facing the company that I probably should have included in the article. The company may well blow away my expectations after this whole fiasco is over but until then I tend to be conservative, especially given that I already assumed a turnaround in the first place. Until I see performance to justify a higher multiple, I'm staying conservative.
    Jul 15 12:42 PM | Likes Like |Link to Comment
  • Apollo Group: Value Play Or Stay Away? [View article]
    http://equisear.ch/stock Its a great start-up site.
    Mar 26 11:08 AM | Likes Like |Link to Comment
  • Apollo Group: Value Play Or Stay Away? [View article]
    Wow sounds like more a problem of sentiment then, but the actual regulatory and accreditation issues arent as bad as I had thought. It certainly is a messy sector but often times that's where you have to go to find the big winners of tomorrow. These companies were stock market darlings just a few years ago and very well could be darlings again in a few years. I know you don't like Bridgepoint but the company is cheap I don't think there is any way around that. I for one am watching carefully waiting for news on accreditation and if I get a definitive answer and the annual report looks good 3/12 I might jump in big. Thanks for all the info.
    Feb 23 10:42 AM | Likes Like |Link to Comment
  • Apollo Group: Value Play Or Stay Away? [View article]
    Any other info you can give me and readers about how regulations will change the industry and the likelihood of APOL, BPI, and other companies maintaining accreditation?
    Feb 22 03:16 PM | Likes Like |Link to Comment
  • Apollo Group: Value Play Or Stay Away? [View article]
    Thanks Justin, I had known Apollo had some presence overseas but only in Latin America, Europe, and online of course. It didn't seem very significant to me because I think China is where they could do really well and I believe only about 10% of the company's sq feet are overseas.

    That link was really helpful. I'll be honest I've been invested in Apollo and other for-profits in the past and I had never thought to read the executive order or seek more information than articles, Apollo's annual reports, and the congressional report. Looking at the executive order made me realize how much for-profits will have to change operationally. They'll have to be much more candid when recruiting students, especially about costs of attendance. They won't be able to pay recruiters through commissions. They'll certainly have a ton more paperwork. They'll have to keep default rates below a specified percentage and retainment rates above a specified percentage to maintain federal funding. It really is going to be an overhaul of the industry. I would argue though that I did say in my article that they'd have to change their business models and increase spending significantly. I definitely should've done a little more research though and been more specific. I still don't think APOL is a buy. Bridgepoint, despite having to make major changes has still proven itself as a profitable company in the past and it has a ton of cash. They release their annual report 3/12 and I think that will shed plenty of light on the accreditation issue. If they do manage to maintain accreditation the stock price will increase significantly, I can promise you that. Best bet is to watch the company and read the report right on March 12th.
    Feb 22 03:09 PM | Likes Like |Link to Comment
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