School's back in session, and for-profit educator Laureate Education
What analysts say:
- Buy, sell, or waffle? A dozen analysts study Laureate, one more than three months ago. Nine now rate the stock a buy, and three still say hold.
- Revenues. On average, the analysts are looking for a 29% improvement in sales to $256.8 million .
- Earnings. . but a 22% slide in profits per share to $0.18.
What management says:
Laureate blew the lid off the joint last quarter, reporting more than 25% growth in everything from online student enrollment to on-campus enrollment to revenues to earnings from continuing operations. As such, the company's making darn good on CEO Douglas Becker's promise to grow profits at the rate of 25% per annum all the way through the year 2010.
The outlook going forward isn't quite so bright, however, which actually hearkens back to my past comments about the firm's on-again, off-again performance. Case in point: Laureate basically agreed with the analysts when it predicted last quarter that Q3 results would come in at $0.16 to $0.19 per share, quite a bit less than one year ago. For full-year 2006, the firm likewise suggested it might disappoint, predicting anywhere from $1.93 to $2.05 per share in GAAP profits, which could translate into a bit less than 25% growth. And looking farther out, Laureate sees about 20% profits growth in fiscal 2007.
What management does:
"Clear Trends 101" isn't on the syllabus at Laureate, not even as an elective. From quarter to quarter, the firm's margins can go in any direction -- even when measured on a trailing-12-month basis, which is intended to smooth out the short-term bumps. All we can say for certain is that for the last little while, Laureate has posted great revenue growth, and generally better gross and operating margins than it was hitting a year ago.
|
Margins % |
3/05 |
6/05 |
9/05 |
12/05 |
3/06 |
6/06 |
|---|---|---|---|---|---|---|
|
Gross |
16.9 |
18.2 |
17.7 |
18.3 |
17.6 |
18.1 |
|
Op. |
13.6 |
15.2 |
14.6 |
15.4 |
14.6 |
14.9 |
|
Net |
9.4 |
8.7 |
8.4 |
8.6 |
7.8 |
8.8 |
One Fool says:
Three months ago, I laid out a wish list of three things I wanted to see out of the company's
Q2 report card. Laureate flunked two of the three subjects and took an incomplete in the third:
- First, I wanted the company to publish its cash flow statement in its earnings release. There's no good reason not to, but the firm still isn't doing it.
- Second, I wanted that cash flow statement (you know, the one they won't show you) to tell us that Laureate generated strong free cash flow in the second quarter. Unfortunately, as strong as GAAP profits were, free cash flow declined year over year. In the first half of 2006, the firm generated only $10 million, or less than half of what it racked up during H1 2005.
- Finally, I hoped against hope that the firm would establish a trend toward rising gross, operating, and net margins. Laureate did in fact post great numbers, but one quarter does not a trend make -- for this company especially. Score that one an incomplete, and let's see whether the firm can keep the margins moving upwards on Thursday.
Competitors:
- Apollo Group
(NASDAQ:APOL) - Career Education
(NASDAQ:CECO) - Corinthian Colleges
(NASDAQ:COCO) - DeVry
(NYSE:DV) - ITT Educational Services
(NYSE:ESI) - Strayer
(NASDAQ:STRA)
Want to learn more about the for-profit education industry? Get the inside scoop from former Apollo Group CEO Todd Nelson. Read our interview with him here.
And for a purely Foolish overview of the industry, don't miss:
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Fool contributorRich Smithdoes not own shares of any company named above. The Fool's disclosure policy is academically rigorous.
