School's out for the summer, but a for-profit educator's work is never done. DeVry (NYSE:DV) reports its fiscal Q4 and full-year 2006 earnings tomorrow afternoon.

What analysts say:

  • Buy, sell, or waffle? Solve: If four analysts rate DeVry a buy, and three times that number rate it a hold, how many analysts follow DeVry?
  • Revenues. On average, analysts expect sales to come in 10% higher than last year at $216.1 million.
  • Earnings. They predict profits more than twice as high as last year. The target is $0.19 per share.

What management says:
Big changes are afoot in DeVry's executive offices. CFO Norman Levine stepped down late last month and returned to his past role as a senior vice president, being replaced by ex-PepsiCo (NYSE:PEP) CFO Richard Gunst. Gunst brings with him a wealth of financial management experience -- 25 years -- having worked also for industry stalwarts such as ConAgra (NYSE:CAG) and now-BP (NYSE:BP)-owned Amoco.

The month before that, it was namesake business DeVry University that switched bosses. President John Skubiak surrendered his chair to a returning DeVry executive, David Pauldine. Skubiak, too, is remaining with the company, but in a part-time, business development role.

What management does:
I have to say that the changes seem strangely timed, though. Over the last year, the business has shown considerable improvement in its profitability metrics -- not the kind of thing that ordinarily gets a CFO demoted. Rolling margins are rising across the board, and rolling operating and net margins in particular have been on an uptrend for the past year.

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

45.2

45.3

45.1

45.5

46.0

46.3

Op.

8.1

7.9

6.8

7.5

8.1

8.2

Net

5.0

4.3

3.7

3.9

4.6

5.1
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Margins have been rising because management has been doing a pretty decent job of controlling its costs under Levine's financial leadership. Sales growth over the last six months, clocking in at 8%, has been only matched by growth in selling, general, and administrative expenses. Meanwhile, the company has kept its cost of services down to just a 6% increase during the same time period.

From an investor's perspective, things are looking up as well. When I last looked at the company's valuation, back in January, the stock was still looking mighty pricey as investors bet on its turnaround. Now that the turnaround is beginning to prove itself "real," profits are beginning to catch up to the expectations reflected in the stock's price. At last report, DeVry boasts $72 million in free cash flow, and a not-entirely-unreasonable price-to-free cash flow ratio of 21.5. With analysts projecting profit growth at 17% per annum over the next five years, the stock's still not a bargain, but it's getting there.

Competitors

  • Apollo Group (NASDAQ:APOL)
  • Strayer (NASDAQ:STRA)
  • Corinthian Colleges (NASDAQ:COCO)

What can make a stock go up faster than the greatest of great earnings reports? A would-be buyout and the chance of a premium. Read all about DeVry's suitor rumor in "DeVry's the Prize."

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