Why Strayer Shares Flunked Out

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of for-profit educator Strayer Education (Nasdaq: STRA  ) were getting sent to the principal's office today, falling as much as 17%, after disappointing guidance in its earnings report.

So what: Nearly every important financial metric was down for Strayer as revenue fell 9%, to $124.3 million, and earnings per share dropped 70%, to $0.36. Those results actually beat estimates slightly as the company managed to increase new student registration by 4% in the fall term, even though total enrollments fell 5%. The real issue came with the company's decision to suspend its dividend in 2013, and its lowered forecast. Strayer plans to use the former dividend cash flow to build new campuses, and says it expects to earn just $1.43-$1.45 per share in the fourth quarter. Analysts had projected $1.59. Also, 2013 is expected to be slightly lower than 2012.

Now what: The for-profit education sector has been falling across the board as the Department of Education has stepped up oversight, imposing tighter regulations on graduation rates, loan default rates, and marketing expenditures. Enrollment, a key industry metric, has been falling of late. Strayer may be able to increase the number of students by adding new campuses but, as long as enrollments are falling at mature campuses, which saw a 10% drop this quarter, I'd stay away.

Don't miss Strayer's next report card.

Add Strayer Education to My Watchlist to get every update on the company.


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

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.

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: 2105453, ~/Articles/ArticleHandler.aspx, 10/31/2014 8:17:00 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...


Advertisement