Take out your red pens, Fools. For-profit educator DeVry (NYSE:DV) hands in its midterm exam after the market closes on Thursday, and it's time to do some grading.

Wall Street Wisdom:

  • General consensus. The level of bullishness among the 16 analysts following DeVry resembles a bell curve gone wild. Three-quarters of these experts huddle in the middle with "hold" ratings. Three bulls stand on the left exclaiming "buy," while one stands to the right whispering "sell."
  • Revenues. DeVry had a miserable fiscal 2005, so things can only get better when we hear the results for fiscal Q2 2006 (one hopes). Analysts, believing that revenues grew 4% over last year, share those hopes.
  • Earnings. Same story on profits. DeVry's stock got shredded one year ago, when it reported just $0.08 per share against analyst expectations of $0.11. Tomorrow, the analysts think DeVry will easily best last year's numbers to report $0.13 per share.

Margin watch:
What explains those three analysts on the left side of the bell curve? In a word, margin trends (OK, two words). See the long, painful decline in margins on the chart below? Now focus on the last column -- there's an uptick there, across the board. These three analysts are betting that DeVry has turned the corner and that it will continue to improve in future quarters.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

46.6

45.8

45.2

45.1

45.1

45.5

Op.

11.5

9.7

8.2

7.6

6.8

7.5

Net

7.4

6.3

5.1

4.5

3.7

3.9

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Valuation metrics:
Unfortunately for you, the investor, those analysts aren't the only ones who noticed last quarter's uptick. We highlighted DeVry's "revival" here at the Fool back in October. And the rest of the market saw it, too. As a result, DeVry's future success is mainly priced into the stock -- even though it's still uncertain. The company trades at 44 times trailing earnings and 39 times trailing free cash flow, despite having projected earnings growth less than half either of those multiples. If DeVry stumbles tomorrow, those who bet on a dream may be in for one expensive education.

Competitors:
DeVry's peers won't make its revival easy. The company faces a plethora of rivals, from king of the hill Apollo Group (NASDAQ:APOL), Career Education (NASDAQ:CECO), Corinthian Colleges (NASDAQ:COCO), and ITT (NYSE:ESI).

Fool contributor Rich Smith does not own shares of any company named above.