Apollo Group, Inc. (NASDAQ:APOL)

As students become more knowledgeable about the effects of "bad school debt" you'll see lesser margins in companies such as APOL as overall school enrollment will steady and people will not look to APOL or others as potential areas to increase their job marketability.

Revolution Investing new short due to the premise of exploding student loan debt that will make it very difficult to repay, if at all, and new federal regulations.

http://www.fool.com/investing/general/2011/11/18/this-industry-has-a-failing-report-card.aspx

Fundamentally, this company and along with the industry is going into a decline. There is no way they are going back to the heady days of the boom years with people buying into their terrible for profit degrees. I fail to see how people think this is a good company when student enrollments keep declining by double digits. While they may beat earnings for this quarter or the next, think long term. If new student enrollments keep declining, I fail to see how they are going to properly guide to ever rosier forecasts.

going to get hit by CECO fallout.

See shahart's write-up and my response. That's a pretty good indication that thing isn't worth any more than the metaphorical piece of paper it's printed on.

Total scam. Expect enrollment to continue to decline, especially with spiraling student loan debt nationwide. No amount of advertising can cover up that ugliness.

This company has built a revolutionary business based on the belief of founder John Sperling that lifelong employment with a single employer would be replaced by lifelong learning and employment with a variety of employers. The need for education options in an economy that demands highly skilled workers is proving the thesis.
Apollo Group is one of the world's largest for-profit education companies, with 350,000 degreed students enrolled in its core school, the University of Phoenix. The company offers classes online and through physical learning centers in nearly 40 states as well as various international locations. Programs range from associate to doctorate degrees in areas such as business, education, health care, technology, and social and behavioral sciences.
Apollo was trading at $90 a share in early 2009, we added it to our portfolio at slightly over $40 a share. For profit education came under increased scrutiny in the last two years as problems of student defaults and aggressive recruiting gave the industry a black eye. We believe that Apollo has gotten out in front of the problem in part by instituting a screening process that weeds out students who are unlikely to complete the program. Although there are clearly challenges that remain, we feel that Apollo provides an important function in the 21st century economy that requires individuals to continue to learn throughout their careers.
Apollo is a free cash flow machine, generating close to $900M in 2009 & 2010. Return on equity is double the industry average at 30.7 . Current analyst estimates put it at a PEG ratio of 1.84 which is at the high end of where we like to be, however we feel that organic growth internationally, acquisitions of specialty education firms and a reacceleration of their core business resulting from management’s decisive response to quality concerns, should allow Apollo to beat estimates handily.

When you are buying a stock, you are basically buying a piece (though usually a very small one) of a business. Thus, a part of the business, its properties, and its earnings, belongs to you.
Right ?
Not in this case, fella.
Allow me to quote from the last 10-K, published on October 22nd 2010, the beginning of item 5 :

Our Apollo Group Class A common stock trades on the NASDAQ Global Select Market under the symbol “APOL.” The holders of our Apollo Group Class A common stock are not entitled to any voting rights.

No voting rights. In other words, you can buy the entire stocks of Apollo, and you still won’t have a say on who runs the business and how to run it, whether to pay dividends (they never did by the way, and they are not planning to either), or any other thing, for that matter.
This is not a stock. It is just a piece of paper, with Apollo’s name on it.

If I were an American citizen, I would urge my representatives to make this kind of a prank illegal. A stock should give you a legal ownership of part of the company, and that comes with voting rights, and it shouldn’t be allowed to be called (and traded as) a stock otherwise.

I don’t know based on what this stock is priced. Apollo may have strong earnings (or not) great balance sheet (or not), and great growth potential (or not). But all that has nothing to do with the stock.

I gave it a thumb down and I am already losing 21 points for it. But I will continue giving it a thumb down, and I will not cease, because as a value investor in heart I know there is only one right price for this paper, mistakenly named as a stock – zero.

MFI Screen

Not as cheap as ESI or LINC which I'm also bullish on but has a better established brand name and is the recognized innovator in the field of online education. If people want to go to school online, they usually think "university of phoenix online".

You ever get a speeding ticket? Did you elect to go to online traffic school to avoid the "points" against your license?

These guys almost certainly got a cut.

Online learning is big business; not only do they have 315,000 full-time and part-time enrollees, they make a lot of money off these one-shot deals. You've probably taken one of their classes and not even known it.

MF

This is one of my long time favorites, and luckily for value finders this stock tanked from a high.

Great ROE and profit margins stem from the fact that this business generates money with little expenditures... just the way Buffet likes it.

The nice thing is education is valued in both recessions and expansions: in recessions it's the way to get a leg up so that a job is attainable, in expansions it's just an extra credential. Brand name (University of Pheonix) is good.

Apollo's lack of debt and strong presence in the educational community is simply too strong for where it's stock price currently sits.

Great company, with a great unmet need for in society. Sure, regulations and accountability towards tax payer should be tighter, but in the long run 1year+ they'll be back to $55-$75/share.

it will continue to grow above s&p 500 average levels and is currently undervalued

Solid MFI stock, Somebody has to take care of the poor sick elderly bastards. More of them everyday.

Too much attention from the regulator has caused this company's stock to perform poorly, even though the profits have kept rising for several years. Yes the recession gave them a good boost due to their counter-cyclical nature, but even in good times they grew their revenue and profits.

Flipside of all this scrutiny is, they are forced to look into their own practices, and improve the quality of their offering. This will hurt profitability, but since they are so insanely profitable, the loss in profitability is not an issue. Instead, the improved quality means their demand will increase thus making up for the lower margins.

Education is extremely important, we all know that. And its not easy to get an education. The long term trend is in their favor.