What: For-profit higher education company Apollo Education Group (APOL) stock got hammered Thursday, down 32% just before market close, following release of Q4 and full-year earnings earlier in the day. The company, which is best-known for its online University of Phoenix, reported revenues fell 14% in the fourth quarter, leading to a net loss of $10.2 million, which works out to $0.09 per share in losses.
So what: Apollo is dealing with the same secular shift away from for-profit higher education that's hitting the entire industry. New enrollment at University of Phoenix fell by nearly one-third in the quarter and total enrollment was almost 20% lower than in the same period last year.
Now what: Apollo Education's stock is down 78% since the beginning of the year, earning a "best of the worst" award among several for-profit education competitors:
Apollo and competitors like DeVry Education Group, Inc (ATGE -0.35%) and ITT Education Services (ESINQ) are far from a value stocks at this point, frankly. Apollo was recently barred from actively recruiting U.S. military as students, further putting a squeeze on the company's potential student pool. This will only further increase competition for all of these companies, which will likely continue to squeeze on margins, as well as driving up operating expenses as a percentage of revenue.
All three of these companies have seen earnings per share get crushed over the past several years:
APOL EPS Diluted (TTM) data by YCharts
Factor in steps by major traditional colleges and universities around the country to expand their online offerings, and things are likely to get harder before they get easier for the University of Phoenix's parent company. There's the possibility that Apollo Education turns into a great turnaround investment down the road, but I'd want to see signs that the bleeding has stopped and the healing has begun, before risking any capital in this (or any) for-profit educator.
