Education-related stocks seem to be coming up in every value stock screen. The reason they are showing is simple. First, over the past few years, for-profit education providers have benefited from tremendous growth and profits. Second, share prices amongst the industry names have fallen hard while the balance sheet and income statement still look good. So, is there opportunity in for-profit education for investors?

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

You Decide
There's a bit more to the story. For-profit education providers are under intense pressure by the government and other organizations who are accusing the schools of boosting enrollment in order to boost revenues without regard to student qualification. The schools are being accused of having very liberal acceptance requirements in order to boost enrollment, since students are paying for college with student loans provided by the U.S. Department of Education. The charges further allege that students are graduating with loads of debt and inadequate skills to find a job to pay off that debt. It's beyond the scope of this article to go into the details, but that is the basic situation. Eventually, investors dumped shares in fear that enrollment rates will decline and reduce growth.

SEE: How To Ask Your Employer To Fund Your Education

Clearly, there are issues with the enrollment procedures in the industry. However, the value of education is without question. And for-profit schools that offer online or evening studies are very popular for working adults who want to further their schooling without giving up a daytime job. So at the end of day, there will be for-profit education providers. Whether or not the price is right is up to the individual investors. But clearly the numbers are intriguing. Career Education (Nasdaq:CECO) trades around $6 a share. The company has a market cap of $400 million and over $280 million in cash, on the balance sheet.

Corinthian Colleges (Nasdaq:COCO) has taken the hardest hit. Shares trade for around $2.60, and the compnay has a market cap of approximately $225 million. The company earned over $120 million in EBITDA over the last 12 months. Net debt is about $98 million. About 25% of shares are held short. If the company's fortunes improve, shares could move up quickly.

SEE: Turnaround Stocks: U-Turn To High Returns

Strayer Education (Nasdaq:STRA) shares trade around $100, off from just under $150 over the past year. The shares yield 4.3% and trade for 12 times earnings.

New Oriental (NYSE:EDU) has held up the best given that it operates in China where education is a prized privilege. As such, EDU is not as cheap as other names in the space. In fact, trading at 21.5 times forward earnings, EDU clearly appeals to investors who want the China exposure. The company boasts a market cap of $3.85 billion, no debt and over $757 million in cash.

SEE: The Correlation Between Education And The Economy

The Bottom Line
The education industry is under significant pressure and the valuations look appealing. Yet investors will have to get comfortable with the headwinds currently facing the industry and compare them with the potential positives in order to determine investment merit. Battered down stocks that were left for dead can come back to life very quickly if the tide turns.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Is Now the Right Time to Buy Brazilian Stocks?

    Examine the current state of the economy of Brazil, and learn why there may be some reasons for investors to look for a rally in Brazilian stocks.
  2. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  3. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  4. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  5. Investing Basics

    How to Think About Seasonality Trends

    Investors benefit when company research incorporates seasonality trends that predict relative strength and weakness throughout the calendar year.
  6. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  7. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  8. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  9. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  10. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  1. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  2. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  3. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  4. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  5. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  6. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!