Career Education Corp. (NASDAQ:CECO)

CAPS Rating: 2 out of 5

A dynamic educational services company committed to quality, career-focused learning and led by passionate professionals who inspire individual worth and lifelong achievement.

Recs

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Player Avatar TFNdaddy (45.30) Submitted: 1/29/2007 8:47:40 AM : Outperform Start Price: $28.07 CECO Score: -130.27

Career Education is probably the worst secondary education company in the country. It mainly runs culniary, technology and design programs but also has two online schools. The company has been under regulatory investigation for almost three years for financial, as well as academic, issues and the company's American Intercontinental University remains under serious regulatory restrictions.

Despite its poor track record with the education powers- that-be, its track record of cash flow generation is unmatched. The company generated over $250 mln in free cash flow last year and $230 mln the year before. And CECO is on track to match its historical results this year.

The company is also showing signs of life in battling the regulators. The Department of Education recently lifted growth restrictions on the company, indicating that, at the very least, CECO is moving in the right direction. In addition, CECO could hire a new CEO and/or divest of underperforming divisions.

Despite its poor track record, the stock is trading at about 10x Free Cash Flow, indicating the negatives are already discounted. Any additional positive announcements could spur the stock even higher.

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