School's back in session, and so is for-profit educator DeVry (NYSE:DV). On Tuesday, the company will report its fiscal first-quarter 2007 earnings.

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts major in DeVry. Five of them rate it a buy, and the rest a hold.
  • Revenues. On average, DeVry's analysts expect sales to come in 10% higher than last year, at $216.3 million -- pretty much the same as last quarter.
  • Earnings. They predict profits more than twice as high as last year, at $0.12 per share.

What management says:
DeVry has had nothing much to say over the last three months (at least, nothing it thought worth filing with the SEC), so let's go to the tape and see what happened last quarter. Last quarter, you will recall, marked the end of the firm's fiscal 2006 -- and what a year it was. Capital expenditures were down; free cash flow was up; and the firm's balance sheet improved.

COO Daniel Hamburger summed up the year best: "Throughout 2006, DeVry demonstrated steady progress as we responded to an evolving and more competitive environment in Education."

What management does:
You can see that steady progress illustrated in the table below. Over the course of the year, rolling gross margins ticked upwards in each successive quarter before plateauing in the fourth quarter, and operating and net margins followed suit.

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

45.3

45.1

45.5

46.0

46.3

46.3

Op.

7.9

6.8

7.5

8.1

8.2

8.1

Net

4.3

2.3

3.9

4.6

5.1

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:
Since the plateau occurred sometime between fiscal Q3 and Q4, let's take a closer look at the numbers for those two quarters. Sales grew 9% -- about par for the course for the year. Cost of sales grew only 8%, which explains the improved gross margins. Operating costs, however, started to rise faster than sales at 10%. And there's your problem: In the first half of fiscal 2006, DeVry held its operating costs to just a 4% rise against sales growth of 6% in the first half of the year. In the second half of the year, however, the firm's fiscal discipline began to relax a bit, and margins halted their rise.

So here's the question for investors betting that DeVry can turn itself around without outside help: Can the company keep growing revenues faster than costs? If so, the firm may well survive on its own. If not, then inevitably, competitors such as Apollo (NASDAQ:APOL), ITT (NYSE:ESI), and Strayer (NASDAQ:STRA) -- each of which sports operating margins several times as robust as DeVry's -- will run circles around DeVry in everything from offering better services to prospective students, to having the funds to market those services more effectively.

Want to know what I'll be looking for next week? Margins, margins, margins.

Other competitors include:

  • Career Education (NASDAQ:CECO)
  • Corinthian Colleges (NASDAQ:COCO)
  • Laureate Education (NASDAQ:LAUR)

What did we expect out of DeVry last quarter, and what did it produce? Find out in:

Which educational upstart made Tom Gardner and Bill Mann's list of the best underfollowed stocks on the market? Find out with a free 30-day trial to Motley Fool Hidden Gems.

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