Capella Education Company (NASDAQ:CPLA)

Relatively low student default rates, lots of growth potential online, solid position in industry, unfairly beaten down. Lots to like here.

Significantly under-priced due to overreactions about regulation. Currently priced in the low 30's, and worth every bit of $100/share. This is one of the best managed online educators, and has a wide moat with its focus on graduate degrees. Additionally, this sector has much room to grow as adults slowly realize for-profits can provide better education for less money than traditional schools.

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Magic Formula

With only a few exceptions, the for-profit education sector is doomed, especially those which are heavily dependent on online revenue. Ultimately their doom won't be attributable to government intervention; that might just speed up the inevitable. The problem is competition from traditional universities, which are increasingly running for-profit ventures, as I've seen firsthand in the education industry. Competition from real universities is something most investors don't understand: most of these traditional schools are now offering online and continuing education courses, often in remote parts of the globe, that use precisely the same business models that outfits like Phoenix are using. Universities finance their traditional programs out of these for-profit enterprises. These schools have a huge leg up on the for-profit colleges: (a) zero taxes on endowment gains; (b) a reputable name/accreditation; (c) government support in the form of subsidies, grants, etc. Meanwhile, the for-profit schools only have tons of research showing that for-profit schools are the equivalent of quicksand for students. The only thing that the for-profit schools have going for them is the insistence that the free market can do everything more efficiently -- to which one can only reply: the traditional colleges have already figured that one out for themselves, and are heavily invested in for-profit strategies already.

Longshot Capella could skyrocket when those matters are put to rest.

Look beyond the common ratios such as P/E and you'll find very solid numbers. Return on equity in the 20's, zero debt, solid cash flow ...

NAV

Capella Education Company is an online postsecondary education services company. Through its wholly owned subsidiary, Capella University, the Company offers a variety of doctoral, master's and bachelor's programs. As of December 31, 2009, Capella Education Company offered over 1,050 online courses and 36 academic programs with 124 specializations to approximately 34,000 learners. The Company also offers certificate programs, which consist of a series of courses focused on a particular area of study. In addition, Capella Education Company also offers academic services, such as new learner orientation, technical support, academic advising, research services (particularly for doctoral degree candidates), writing services and online tutoring. It also provides appropriate educational accommodations to learners with documented disabilities through its disability support services team. Demand is great for online schools, and this is one of the leaders in this industry. Return on Equity is 25.82%. and the one year EPS gowth is approximately 40%. Stock price has demonstrated +43% appreciation in the last 6 months and +68% appreciation in the last year. Chart shows a bullish trend, and this should continue.

ibd

Serious problems with management - very little regard for ethical behavior. Over the past year, the United States Department of Education, Office of the Inspector General found several violations of Federal Law and the University's Financial Aid Director was fired for accepting kickbacks from student-loan industry.

University consistently fails to disclose relevant information such as acceptance and retention rates of students.

Capella University, founded in 1993, offers graduate degree programs in the fields of business, information technology, education, human services, public health, public safety, and psychology, as well as bachelor's degree programs in the fields of business, information technology, and public safety. The university is exclusively online, and focuses on the needs of adult students who want a high-quality education they can pursue from any location. More than 23,400 students are currently enrolled, representing all 50 states and 45 countries. Eighty-three percent are pursuing master's or doctoral degrees.

Capella Education Company and Capella University are both headquartered in Minneapolis, Minnesota, and together employ more than 1,100 administrative staff and more than 1,000 faculty members.

HighGain+ HighPE

We're doing more and more and more online, undoubtedly education is next. I foresee Capella being able to tap into multiple customer segments -- tech savvy people without the time to devote to typical classroom learning for an advanced degree; blue-collar workers who are "down-sized" and lower tax bracket folks who will use it a la a community college, one class/credit at a time as $$ allows.

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Solid company. Good business model - not a scam house with shady loans. Corporate reimbursement of education costs makes this a good path for people looking to advance a career in a shaky market.

Online education is key.

Better than REVU

Play on the online education