Our Top Stock Idea

Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, the Motley Fool's 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words.  Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.

Company Apollo Group (Nasdaq: APOL  )
Submitted By: Einstiensbastard
Member Rating: 47.77
Submitted On: 8/16/2011
Stock Price At Underperform Recommendation: $47.38

Apollo Group profile

Star Rating **
Headquarters Phoenix
Industry Education
Market Cap $6.2 billion
Industry Peers

Strayer Education (Nasdaq: STRA  )

Bridgepoint Education (NYSE: BPI  )

Corinthian Colleges (Nasdaq: COCO  )

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch:

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.

Follow this!
Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.

The Motley Fool is investors writing for investors. Dan Dzombak did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. The Motley Fool owns shares of Bridgepoint Education. Motley Fool newsletter services have recommended writing puts in Bridgepoint Education. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1541138, ~/Articles/ArticleHandler.aspx, 10/23/2016 11:50:53 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
APOL $8.87 Up +0.38 +4.48%
Apollo Group CAPS Rating: *
BPI $6.85 Down -0.19 -2.70%
Bridgepoint Educat… CAPS Rating: **
COCOQ.DL $0.00 Down +0.00 +0.00%
Corinthian College… CAPS Rating: *
STRA $46.37 Up +0.76 +1.67%
Strayer Education CAPS Rating: **