Tickers in this Article: COCO, STRA, CECO, APOL
As job seekers become frustrated due to a lack of available positions, they will start turning to higher education and certificate institutions in an attempt to pad their resume. These schools and institutes could see sales increase in the short run, but they could also turn a year-long investment into a solid four- to five-year hold. There have been concerns over student loan regulations making it harder to borrow for students, so caution should be taken. Back to school is just around the corner, which will be affecting the next quarter earnings. But once the students are in, there will be a four- to five-year revenue stream for the schools.

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Banking on Education
Corinthian Colleges (Nasdaq:COCO), a post secondary education company, has just released fourth-quarter and full-year earnings ending June 30, 2010. Student population growth was up 14% to 110,580, compared to 86,088 in the same period one year earlier. New student enrollment was up 18%, from 29,188 last year to the current 34,486. It's no wonder diluted earnings per share increased from 28 cents to 38 cents, a 36% jump creating a tiny P/E of 3. It does mention in the release some lower bad debt expense due to higher student retention. So more money is coming in, and more students are staying - as long as the students can find funding to pay.

If student loans are going to be tougher to get in the future, it could actually increase enrollment now, while the loans are still readily available. The recent rumblings of changes in regulations have not been kind for education-based companies such as Apollo Group (Nasdaq:APOL). These companies sell a product that requires a loan - no loan, no revenues. As for now, revenues are up, and income is coming in. (For more, see Education Stocks Put To The Test.)

Strayer Education (Nasdaq:STRA) is a company which, with its subsidiary Strayer University, runs education services through on campus and online avenues. In its most recent quarter, ending June 30, 2010, diluted earnings per share are up 30%, to $2.60 from $2.00, in the comparable period last year. Profit margin was 22% on $159 million in revenues. What makes Strayer a little different is that the focus on working adults, exactly the adults which want to increase their skills during this downturn. In the summer alone, Strayer stated enrollment was up 23%. (Consolidating your student loans offers convenience, but there are drawbacks. Read Should You Consolidate Your Student Loans?)

Career Education Corporation (Nasdaq:CECO) is another education company benefiting from easing of student loan requirements and the need for individuals to be competitive in the labor market. CEC had earnings per share of 81 cents from continuing operations in its second quarter, ending June 30. That's up 200% from the comparable period one year earlier.

The Bottom Line
The tough employment market is pushing individuals to go back to school or start college. Colleges in North America focusing on post-secondary will have student loan regulations as a sticking point, but it could create a buying opportunity. In the next couple weeks, or even into months, speculation could drive these stocks further down. (For more, see Payback Time In For-Profit Education.)

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