Last week, in previewing the Q2 2006 earnings release for Laureate Education (NASDAQ:LAUR), I pronounced myself "at a loss as to where the company is heading." In that, I wasn't alone -- pretty much all 11 of the analysts who track this stock for a living were caught with their pinstripes down on this one. Their earnings estimates of $0.66 to $0.70 for Laureate came nowhere near capturing the reality of Laureate's $0.77 reported profit from continuing operations.

Laureate, which bills itself as "the world's leading international provider of higher education," posted strong double-digit growth in pretty much every metric you might want to name:

  • Revenues: up 34%
  • Profit from continuing operations (per diluted share): up 28%
  • On-campus student enrollment: up 34%
  • Online student enrollment: up 27%

Existing Central American and online operations showed the fastest organic growth (25% and 21%, respectively). The acquisition of three schools in Honduras, Brazil, and Cyprus contributed significant inorganic growth.

The catch
So here's the catch. Last week, I admitted to not seeing any clear trend in Laureate's profits. I still don't -- and that has me worrying whether investors overreacted in bidding up the company's shares by 19% in Friday trading.

Did the company post a bang-up quarter? No doubt. And yet, despite posting stellar growth under most metrics, Laureate only reiterated its profits projections for the full year. Think about it: Laureate crushed Wall Street's estimates for the quarter, and yet the company didn't move its target for the year one whit. Why? Perhaps for the same reason that, last week, I was unable to say which way I thought the company was headed. Nearly every quarter for the last 18 months, Laureate's margins have bobbed and weaved -- up one quarter, down three months later.

Take a look at last week's table once more:

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

18.3%

16.9%

17.3%

16.9%

18.3%

17.6%

Op.

15.0%

13.6%

14.3%

13.8%

15.4%

14.6%

Net

9.7%

9.4%

8.9%

8.6%

8.6%

7.8%

The only clear trend in evidence is a steady march downwards on the net margins line. Now admittedly, Laureate blew the top off the curve last week as its net margins grew 300 basis points versus last year, hitting a superb 12.5%. But the more I look at that table above, the more I fear that just means next quarter's numbers will disappoint.

What other for-profit educators have Fools feeling ambiguous these days? Stephen Ellis takes a look at Laureate, and also at Apollo Group (NASDAQ:APOL) and Career Education (NASDAQ:CECO), in "Apollo: A Shining Opportunity."

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