University of Phoenix Gets Good Marks

Baltimore – (TFN): Education is big business these days. As a product of both state- and privately funded schools, I can attest money-hungry bursars are not an endangered species in the world of higher education.

For the University of Phoenix and its owner Apollo Group (NYSE:APOL), the money collectors have never been busier. In fact, the company just announced its first-ever billion-dollar quarter.

With unemployment levels ready to jump over double-digit thresholds, more and more Americans are looking for ways to boost their résumé’s appeal. One way of doing it is heading back to school.

While academia debates the merit of online, for-profit schools, the student market is not. Folks too busy or unqualified for traditional brick-and-mortar campuses are flocking to the University of Phoenix and its competitors for a chance at a diploma.

While few will argue Apollo boasts the best programs on the market, it is impossible not to admit the company has the sector cornered. With the biggest name in online education, the University of Phoenix will be an industry power player as long as online education remains popular and, most importantly, accredited.

The debate over college education, who should go to school, who should pay and what qualifications they should have is just starting to heat up.

As the arguments pick up, Apollo will be at the forefront of the publicity. It will be a boon-or-bust opportunity for shareholders.

Today, however, investors are not focusing on the future. They are looking at past results and liking what they see.

An apple for the teacher

Most importantly, thanks to the company’s first-ever billion dollars in quarterly revenue, Apollo earned just over $200 million over the past three months.

Thanks to a tuition increase, Apollo was able to turn a year-over-year enrollment increase of 21.8% into a revenue increase of just shy of over 26%.

On a per-share basis, the company recorded earnings of $1.26 versus the previous corresponding period’s figure of $0.85 per share. The Street was expecting number in the neighborhood of just $1.12, hence today’s 7% surge in share price.

The company’s margins remain strong and should continue the trend as long as enrollment remains strong.

Some potential hurdles for investors to keep an eye on are the school’s dropout rate (a surprisingly small amount of students finish University of Phoenix programs) and a growing threat from competitors.

As just about every traditional college and university in the nation concedes to the online-education push, more and more students will turn to schools that look better on their resumes. Eventually, the University of Phoenix’s powerful brand could erode, taking some of its 420,700 enrolled students with it.

With unemployment rosters growing, more Americans will turn towards education. It is a temporary boon for Apollo and its investors. In the short-term the stock has legs, but it is up to the company to properly manage its brand if it wants to remain an industry leader.

For now, Apollo certainly deserves a spot atop the dean’s list. (Today’s Financial News)

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