Three months ago, a review of Career Education's (NASDAQ:CECO) first-quarter performance revealed precious little amiss. The one number that I thought bore watching, however, has continued to deteriorate. Let's address that first before moving on to the good news.

Bad debt expense from Career Education's students failing to pay their bills increased from 3.8% to 4.9% year over year last quarter. This quarter, the comparison looked similarly bad, both year over year (3.9% rising to 5.1%) and also sequentially (4.9% to 5.1%). So, I repeat: Keep an eye on this. The trend is not encouraging.

In other news, Career Education's second-quarter revenues and earnings rose even faster than its bad debt expenses. Year over year, revenues climbed 60% and earnings 103%. Nice. The company also increased both its operating and net margins. Again, year over year, operating margins climbed from 12.6% to 16.6%; the profit margin rose from 7.7% to 10.0%. Finally, the company also upped full-year 2004 earnings guidance from $1.75 to $1.81 per diluted share.

Like all too many companies, Career Education neglected to provide a cash flow statement along with its earnings release. But it did provide the two lines of cash flow information that inquiring Fools most want to know: cash from operations and capital expenditures. Subtracting the second from the first of these two magic numbers will allow you to quickly determine a company's free cash flow (but not the perhaps more instructive "structural free cash flow," which Tom Gardner has adopted as his metric of choice in evaluating companies for selection in his Motley Fool Hidden Gems newsletter).

To wit, in the first half of 2004, Career Education collected $134.6 million in cash from operations and, out of that, spent $53.5 million on capital expenditures -- thus generating free cash flow of $81.1 million, for an annual FCF run rate of about $160 million. Take the company's current enterprise value of $4.4 billion, divide that by $160 million, and voila! Career Education sports an EV/FCF ratio of 27.5.

So, is that a good or bad price? It depends on whether you trust the professional analysts who follow the company and their prediction of 25% annual earnings growth over the next five years. But on an apples-to-apples basis, with most of the companies in its industry projected to grow at about that rate as well, Career Education is cheaper than, in order from most to least expensive: Laureate Education (NASDAQ:LAUR) (formerly tickered as SLVN), Corinthian Colleges (NASDAQ:COCO), Apollo Group (NASDAQ:APOL), Strayer Education (NASDAQ:STRA), and DeVry (NYSE:DV).

Actually, only ITT Educational Services (NYSE:ESI) looks cheaper than Career Education -- and for good reason.

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Fool contributor Rich Smith owns no beneficial interest in any companies mentioned in this article.