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Excelling in For-Profit Education

By Tom Taulli – Updated Nov 16, 2016 at 4:07PM

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The K-12 sector hasn't done as well as the adult educators, but Plato Learning is out to change that.

It's perhaps a sign that the traditional educational system is broken when one of the hottest sectors is for-profit educators, like Career Education (NASDAQ:CECO), Corinthian Colleges (NASDAQ:COCO), Strayer Education (NASDAQ:STRA), Laureate Education (NASDAQ:LAUR), and Apollo Group (NASDAQ:APOL).

All of the above companies focus on adult education. However, the market for K-12 is another story entirely. With federal cutbacks and state budget deficits, the for-profit companies in this sector have been ailing.

But Plato Learning (NASDAQ:TUTR), a leader in online testing and assessments that focus on K-12, saw this as an opportunity to invest in its business. In the past three years, Plato purchased seven companies, with the biggest being Lightspan, a leader in Internet-based assessments. More than 1,500 school districts use Lightspan solutions.

Already, the Lightspan acquisition has had a positive impact for Plato. In the past quarter, Plato reported an 85% increase in revenues to $32.3 million.

A broader product offering means that Plato is winning bigger contracts. In early March, the company announced a $1.2 million deal with Gallup McKinley County Public Schools.

On the earnings conference call, Plato management indicated that the funding environment for K-12 is improving. Moreover, the reauthorization of the federal law, No Child Left Behind, is a big long-term positive for the company. According to the law, there is increased accountability and assessments for K-12. It's a test that, thus far, Plato has been able to ace.

Want to read more about for-profit education companies? Check out the following articles by Rich Smith:

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.

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Stocks Mentioned

Apollo Education Group, Inc. Stock Quote
Apollo Education Group, Inc.
APOL
Perdoceo Education Corporation Stock Quote
Perdoceo Education Corporation
PRDO
$10.13 (-1.94%) $0.20
Strayer Education, Inc. Stock Quote
Strayer Education, Inc.
STRA
$62.29 (0.13%) $0.08

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