Fiscal 2005 has drawn to a close for for-profit education company DeVry (NYSE:DV), and it comes not a moment too soon.
All year long, we've seen a constant stream of underwhelming news coming out of DeVry corporate HQ in Illinois. For that matter, fiscal 2004 wasn't much better. Last August, the company reported that fiscal '04 closed out with revenue growth of 15.5% but a 5% decline in profits. The bad news for fiscal '05 began last October, when DeVry reported flat year-on-year revenue numbers, but a 60% collapse in profits in comparison with Q1 2004. The second quarter saw continued flatness in sales but an even worse decline in profits. Things really broke down by the time DeVry closed out Q3, with both revenues and profits declining.
And that brings us to now. You'll surely find it no great surprise that the full-year results DeVry posted on Thursday were similarly disastrous. Revenues actually didn't suffer much, falling just 0.5% from fiscal 2004. But profits were another story; they fell by more than half compared with the previous fiscal year. Free cash flow declined 51% year over year to hit a three-year low of $44.7 million. It's also worth pointing out that the company saw its accounts receivable increase by 39% in comparison with last year, a major factor in the free cash flow decline.
As a result, DeVry now has the weakest balance sheet of any of its competitors, none of which has as little net cash as does DeVry. (The company's cash exceeds its debt by less than $1 million.) Apollo (NASDAQ:APOL), Career Education (NASDAQ:CECO), Corinthian (NASDAQ:COCO), Laureate (NASDAQ:LAUR), ITT (NYSE:ESI), and Motley Fool Hidden Gems Watch List stock Strayer (NASDAQ:STRA) all have stronger balance sheets than DeVry does.
However, while all of this news sounds pretty depressing, I do see a silver lining. Simply put, the company has done so badly for so long that it has nowhere else to go but up. Too many of its competitors have made too much money for too long for DeVry to continue with flat growth and declining profits, year after year after year. At some point, I strongly suspect that either one of DeVry's competitors, or else private equity, will step in and attempt to take DeVry private and turn it around. When, or if, that happens, DeVry's investors will hopefully receive at least a small premium to market price as they're put out of their financial misery.
Now that you've seen the overview, dig into the specifics of DeVry's decline, in:
Fool contributor Rich Smith has no position in any company named above.
