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.
