PROXIMO

Even with Aggressive Valuation, For-Profit Education Stocks Seem Overvalued

You indicate that your sense is that Citron is most likely involved in a smear campaign to support their short position. Regardless of whether that is the basis of Citron's analysis, it may be in your best interest to take a peek at their website. Unless their website is based on fraud and lies, and I seriously doubt that it is, you may want to give careful consideration to their short calls. They have been EXTREMELY accurate in their calls----I mean lights out accurate. No way I'd go long against any of their shorts. NEVER.


On Jan 28 11:19 AM User 217100 wrote:

> here is what you wrote:
> "...If we start that DCF analysis with Y1 FCFs of $2.50 and use a
> 4% constant growth rate, we come up with a valuation closer to $45.
> I’d argue that would be the most realistic of the bunch if it were
> not for the other problems at APOL."
>
> you clearly state that you think a yr 1 FCF of $2.50 is the "most
> realistic". This is roughly a 50% discount to where APOL should
> realistically be in the current fiscal year. This could not be further
> from the most realistic. APOL should do close to $5 in FCF in the
> next year and FCF will probably grow at least 20% in year 2. I never
> said your STRA estimate was 50% of the current fiscal year. Your
> $8 assumption is perhaps 5-8% too high, but it is not that far off
> for STRA based on current consensus estimates.
>
> Of course i have not seen your DCF models, so i am not trying to
> dissect them. I am only basing my comments on the details you provided
> which for the most part seem kind of silly. i agree that an 8% cost
> of capital is way too low. but some of your yr 1 FCF assumptions
> do not make sense and your growth assumptions really do not make
> sense either. Your assumptions just all seem to be very arbitrary.
> A traditional DCF model is highly sensitive and easily manipulated
> based on the assumptions. For that reason I think it is pretty unrealistic
> to assume a 5% growth rate in yr 1 or 2 when the real growth rates
> will likely be 3 or 4x that level.
>
> I do consider myself an expert on valuation, but that is not the
> issue here. I am long APOL, but i'm not trying to argue whether
> the stock is over or undervalued. i'm just pointing out that your
> claim that a $2.50 yr one FCF and a 4% growth rate are extremely
> unrealistic and misleading.
> And i did not say valuation does not matter. I said a stock does
> not go up because it is cheap or go down because it is expensive.
> A stock that is expensive may very well go down, but the stock will
> not go down simply because it was expensive. It would likely go
> down because earnings expectations got too high and the company could
> not grow at the rate assumed in the stock price. This is a subtle
> but very important difference in what drives a stock.
> Again, i'm not trying to argue whether APOL is going up or down.
> I've done my analysis and i'm very comfortable with it. The research
> done by citron is interesting, but my sense is they are mostly involved
> in a smear campaign in support of their short position on the stock.
> If you want someone with an agenda it is them. I'm simply stating
> that your assumptions used to justify a $20 valuation for APOL are
> very unrealisic and misleading.
> I'm happy to discuss my opinions on the education sector with you
> offline, but for the purposes of this website, i will remain ananymous.
>
> thanks.
>
>
>
>
> On Jan 28 10:09 AM H.J. Huneycutt wrote: