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After 41% Gain In Career Education, We Are Out

Maudes Capital profile picture
Maudes Capital


  • We no longer see the stock catalysts identified in 2017.
  • A buyout is not likely at these prices. The company is not overvalued, but we believe that the previous earnings momentum is over.
  • The ROE and the cash per share are no more so astonishing.
  • After four years of FCF acceleration, it declined in 2017. We believe that the momentum could be over.


We wrote about Career Education Corp. (NASDAQ:CECO) in Career Education Corporation - ROE 49.57%, One-Third Of Pure Cash, And No Debt. Undoubtedly, it was one of our best pick in 2017. The company returned more than 41% returns in about a year. We appreciate it, and congratulate those followers who followed our advice.

What happened?

The most critical feature was not impressive growth in the amount of student enrollment in 2017:

Our total student enrollment as of December 31, 2017 and 2016 was approximately 34,800 students and 36,600 students, respectively. (Source)

Our readers should remember our article. We said that the company had gone through a large restructuring process, and had sold assets to private equities. We believe that the company brought out the gains from this difficult period in the second part of 2017. Have a look at the good amount of EPS surprises in 2017 and note that the revenue line did not surprise:


As a result, the market pushed up the share price from the $9 mark to hit the $13.24 level and returned more than 41% returns to our readers. Check the following stock chart, wherein the EPS surprises are included:

ChartCECO data by YCharts

What's next?

The future of the stock is more uncertain. The company is still somewhat undervalued. However, we believe that most of the stock catalysts seen in 2017 have now disappeared. Thus, we believe that it is time to be cautious and close the position on this name.

First Reason: ROE, Cash per Share and book value

While we noted in our previous article that the ROE was impressive, more than 50%, right now it is at more rational level, 6.89%. In addition, the cash per share is $2.52, and the book value per share is $4.29. With the shares trading at $9, like in January

ChartCECO data by YCharts

This article was written by

Maudes Capital profile picture
For more articles or research: maudescapital@gmail.comCheck our previous performance:https://www.tipranks.com/bloggers/maudes-capital

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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