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Rosetta Stone's IPO (RST) is better than Bridgepoint Education's IPO (BPI)

|Includes: APEI, APOL, ATGE, BBBB, BPI, CECO, COCO, CPLA, EDU, ESI, LINC, Rosetta Stone Inc. (RST), STRA, SYMC

(NYSE:RST) & (NYSE:BPI) both scheduled for April 13wk

SIMILARITIES

(1) Both are educational stocks
. Rosetta Stone provides language learning software
. Bridgepoint Ed provides post-secondary online education

(2) Both report revenues for 2008 in the $200mm range & both were profitable in 2008

(3) Both have good internal growth track records

(4) The trailing 12 mos P/E ratios are in the same range at price range mid-points:  23.4x for Rosetta; 29.7x for Bridgepoint

DIFFERENCES

(1) Rosetta is a market segment leader with a differentiated product

(2) 95% of Rosetta's sales are in the US, and growth plans are set for international expansion

(3) Rosetta's gross margin is higher, 87% versus 71% for Bridgepoint

(4) Price-to-book value is more favorable for Rosetta: 2.7 versus 20.8 for Bridgepoint

(5) Online comparables to Bridgepoint suggest it is fairly priced (trailing 12 months) relative to Capella Education (NASDAQ:CPLA) at 28x and Strayer Education (NASDAQ:STRA) at 29x.  The range is wide, however, with Apollo (NASDAQ:APOL) at 15x ($10bb market cap) and Grand Canyon (NASDAQ:LOPE) at 93x ($677mm market cap).

Notice that post-secondary online ed stocks sold off 15-17% since March 31, so there are some headwinds in the sector.

Read more
Rosetta Stone IPO:  http://bit.ly/18evtp
Bridgepoint Ed IPO:  http://bit.ly/4DhEsY
Disclosure: No positions