Will Bridgepoint Be the Next Corinthian or the Next Grand Canyon?

Bridgepoint Education  (NYSE: BPI  ) is at a crossroads of challenges and opportunities. It is facing government regulatory pressures like its competitor Corinthian Colleges  (NASDAQ: COCOQ  ) . But Bridgepoint could attract more applicants to its schools following a marketing and branding push that just started, a strategy successfully implemented by Grand Canyon University  (NASDAQ: LOPE  ) . If Bridgepoint can address its regulatory challenges and take advantage of its applicant growth, it could be an attractive investment opportunity. However, Grand Canyon -- with a proven strategy and better financials -- is the best long-term investment out of all three.

The curious case of Bridgepoint Education
Bridgepoint Education recently suffered large declines in enrollment after dramatic growth between 2009 and 2011.

Year end

Year end enrollment

% change from last year
















Source: Bridgepoint Education 

On its May first-quarter 2014 earnings call, CEO Andrew Clark said that 63,624 students were enrolled at the end of the quarter, roughly equal to the 2013 year-end enrollment, while applications had increased by 11%. Its 12-month student retention improved as it retained 64.5% of students compared to 61.6% in the same period last year. Clark added that he expects a turnaround in the second quarter and that the increase in new enrollments -- driven by the growth in new applicants -- and the increased student retention will result in improved financial performance for the rest of the year.

Bridgepoint is making a marketing push to attract more applicants. It spent $7.3 million on additional branding related to new television ads and placements for the quarter, which included airing ads during the 2014 Winter Olympics. It recently renamed its business school the Forbes School of Business at Ashford University. Clark was confident that all of this marketing and branding activity would continue to drive applications since the TV ads covering the renamed business school started in late February. 

However, Bridgepoint acknowledged challenges with the SEC in getting its 10-Q filed -- a bad sign. The SEC wanted to further review Bridgepoint's revenue recognition and doubtful accounts policies. How Bridgepoint will resolve the SEC review remains to be seen.

Corinthian Colleges concedes?
Comparatively, Corinthian has the look of defeat. Its trouble with the Department of Education, or DOE, has led to its sale of 85 campuses and its closure of 12 others.

Since the start of the year, the DOE has sent the school five letters that requested data and other documents, with a focus on Corinthian's dropout rates, student-loan default rates, and marketing of its job-placement rates.  Corinthian failed to respond adequately to the letters, according to the DOE. The school's non-response led to the DOE's decision to limit Corinthian's access to federal funds. This put Corinthian into a crisis, as it receives $1.4 billion annually from federal funds, or 80% of its revenue.

As part of the agreement with the DOE for $16 million in emergency interim funds to continue its operations, Corinthian agreed with the DOE to sell many of its schools and close up others. However, after it announced that it would sell many of its campuses and close many of the others, Corinthian Colleges looks like a class dismissed.

How the Grand Canyon got that way
In contrast to Corinthian with the DOE and Bridgepoint with the SEC, Grand Canyon has not come under regulatory pressure. Grand Canyon has been focused on marketing, branding, getting better students, and increasing enrollment.

On Grand Canyon's April first-quarter earnings call, CEO Brian Mueller said the GPA's of next year's incoming new students were above 3.5. The school's enrollment is up 15%. In the spring semester 90% of its non-graduating fall students come back. And on top of that its graduates are successful--for example, 75% of Grand Canyon's premed students get into a graduate program, compared to a national average of 42%.

Grand Canyon has also marketed itself through other means outside of television and other traditional avenues. Its theater and arts program put together five major productions that have won local awards and appeared on local news multiple times. While Grand Canyon's athletic teams were expected to be at the bottom of their conference, its teams made a splash in their first year -- its women's track team won the Western Athletic Conference, or WAC, and its men's track team placed second. Its Women's softball team won the WAC regular season.

Grand Canyon's executives see a promising future. It currently has a ground enrollment of over 9,500 students and projects ground enrollment of 17,000 by 2016. It is building new dorms in anticipation of a larger student body.

Bridging the differences
Below is a table of select financial and investment measurements for all three schools:



Corinthian Colleges

Grand Canyon

Market Cap

$606.79 million

$24.89 million

$2.15 billion

PEG Ratio (5-yr expected)








Return on Equity




% held by insiders




From Yahoo! Finance

While Bridgepoint does better than Corinthian Colleges, it trails Grand Canyon on many of the management performance measures -- price/book; return on equity; and percentage held by insiders. Even Bridgepoint's PEG ratio indicates that it is pricier than Grand Canyon. If Bridgepoint can successfully execute its turnaround, its future performance measurements will eventually improve.

Bridgepoint has the opportunity to resolve its regulatory challenges and take advantage of higher applicant numbers -- promising signs for the school. While it is premature to say that Bridgepoint has turned the corner, it has the potential to become a worthy investment. However, Grand Canyon has already shown that it can execute a proven strategy and achieve measurements for success. As a long-term investment, Grand Canyon is the one that makes it to the honor roll. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Read/Post Comments (0) | Recommend This Article (2)

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: 3023510, ~/Articles/ArticleHandler.aspx, 9/4/2015 2:03:42 AM

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...

Johnny Chen

Johnny Chen is a very common name, with an uncommon background. Born overseas, raised near Metro Washington DC, educated (and accumulating too many degrees) in Virginia, Kentucky, Massachusetts, and California, Johnny Chen finds himself somewhat surprised that friends and colleagues come to him seeking investment advice. After many comments along the lines of "You really should write down what you said and publish it," he's decided to finally take that step.

Today's Market

updated 4 hours ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

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

9/3/2015 4:00 PM
BPI $7.80 Down -0.07 -0.89%
Bridgepoint Educat… CAPS Rating: ***
COCOQ $0.00 Down +0.00 +0.00%
Corinthian College… CAPS Rating: *
LOPE $37.13 Up +0.26 +0.71%
Grand Canyon Educa… CAPS Rating: ***