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It's hard to differentiate for-profit educator DeVry (NYSE: DV ) from a leech: Both suck the life out of their poor victims (or customers) and provide few rewards to anyone else.
DeVry's bleak report on Monday soured investor sentiment by projecting that new student enrollment for the summer would drop by about 15%. Unfortunately, this dismal outlook only scratches the surface of this underperforming educator's problems.
DeVry earns an "F"
A dramatic decline in enrollment hits the company's bottom line hard, as more than 93% of DeVry's revenue stems from tuition. Much of this comes from federal aid, necessary for the working-class, older students to whom the industry markets. With the national student debt bubble climbing to over $1 trillion, relying on such an uncertain revenue source seems risky at best.
DeVry's boast that 92% of graduates find job placement within six months seems like a beacon of hope. However, that fact holds little water when compared to an abysmal graduation rate of 33%, far below most of the industry, and light years away from non-profit postsecondary institutions.
That makes for a total enrollee job placement rate of just over 30%, a number that doesn't help DeVry's position in an industry where 44% of students defaulted on loans in 2009. The combination of a shaky educational track record and mounting national student debt put the company on uneven footing in an uncertain sector.
Poor stock, worse sector
As fellow Fool Brian Stoffel points out in his recent article, improving domestic employment and a tightening government vise have strangled the hope out of the education industry. Fellow educators Apollo Group (NYSE: APOL ) and Career Education Corporation (NYSE: CECO ) recently hit 52-week lows. While both companies have experienced decreasing enrollment, they still face much better outlooks than DeVry. Much-maligned Bridgepoint Education (NYSE: BPI ) is a closer comparison after watching regulators slash accreditation for its Ashford University, a tough blow that bombed its stock price accordingly.
Ultimately, investors will only find market misery in DeVry's stock. There's little to like with declining enrollment numbers and increasingly stiff industry regulation. With DeVry's future in doubt, I've gone ahead and made an underperform call on CAPS.
DeVry's murky outlook certainly doesn't invite promising expectations. To find an offering that will actually make you money, check out the Fool's free report, The Motley Fool's Top Stock for 2012.