Why Shares of Apollo Education Group Inc. Dropped

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 Apollo Education Group Inc. (NASDAQ: APOL  ) were getting marked down today, falling as much as 10% after a disappointing earnings report.

So what: The University of Phoenix parent actually topped estimates on the bottom line, with a profit of $0.28 per share, better than estimates of $0.19, but sales came up short as revenue fell 18.6% to $679.1 million. Analysts were expecting revenue of $689 million. Enrollment fell at a similar pace as overall student count dropped 16.8% to 250,000 and new student enrollment dropped 16.5% to 32,500. The new student number is particularly concerning, as the figure is the best near-future indicator of an educator's performance.  

Now what: Without a turnaround in new student sign-ups, Apollo won't be able to deliver growing sales or profits over the long term. After a tough couple of years for the for-profit education sector, the stock had been making a comeback, more than doubling over the past 52 weeks, but today's report makes it clear that a sustained turnaround is unlikely anytime soon. I'd wait for new enrollment numbers to bottom out before getting in.

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