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5-Star Stocks Poised to Pop: Ambassadors Group

By Brian D. Pacampara, CFA - Updated Apr 5, 2017 at 7:58PM

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Market-trouncing returns could be written in this 5-Star.

Based on the aggregated intelligence of 120,000 investors participating in Motley Fool CAPS, the Fool's free investing community, educational travel company Ambassadors Group (NASDAQ:EPAX) has earned a coveted five-star ranking. Our data has shown that five-star stocks outperform the market by a significant margin; conversely, one-star stocks have woefully lagged the market average.

With that in mind, let's take a closer look at Ambassadors Group's business, and see what CAPS investors are saying about the stock right now.

Ambassadors Group facts

Headquarters (founded)

Spokane, Wash. (1967)

Market Cap

$171.41 million

Industry

Education and training services

TTM Revenue

$96.64 million

Management

CEO Jeffrey Thomas (since 2001)
CFO Chadwick Byrd (since 2005)

Return on Equity (average last three years)

29.9%

CAPS members bullish on EPAX also bullish on

Apple (NASDAQ:AAPL)
General Electric (NYSE:GE)
First Marblehead (NYSE:FMD)

CAPS members bearish on EPAX also bearish on

Fannie Mae (NYSE:FNM)
Sears Holdings (NASDAQ:SHLD)
Volcom (NASDAQ:VLCM)

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 414 of the 431 members who have rated Ambassadors Group -- some 96% -- believe the stock will outperform the S&P 500 going forward. These bulls include CAPS All-Star TMFBuck and cornpalace.

In October, TMFBuck wrote that Ambassadors Group is a "great business, with an outstanding balance sheet and strong cash flows. Sure there are economic headwinds for this travel business but this business isn't going away and it's very cheap on a normalized basis."

In a more recent pitch from last month, cornpalace agrees, elaborating on the capital-light nature of the business. Here's an excerpt:

Ambassadors Group promotes, and plans educational excursions for middle school on up to business professionals. There are very little assets required for this business so returns on invested capital are huge. Also the company has a negative capital structure, because it receives payment from customers long before they have to pay for the cost of the trips. The only investment the company has to make when a customer orders a trip is a small hedge in foreign currency to ensure that the price quoted will be profitable.

These trips are at high in price (3500-7000) yet also offer college and continuing education credits. Even though these trips are expensive, education is something parents will find funds for.

What do you think about Ambassadors Group, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 120,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Ambassadors Group is a Motley Fool Hidden Gems Pay Dirt pick, Apple is a Stock Advisor selection, Sears Holdings is an Inside Value choice, and Volcom is a Hidden Gems recommendation. The Fool's disclosure policy always gets a perfect score.

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Stocks Mentioned

Sears Holdings Corporation Stock Quote
Sears Holdings Corporation
SHLDQ
Apple Inc. Stock Quote
Apple Inc.
AAPL
$172.10 (2.14%) $3.61
General Electric Company Stock Quote
General Electric Company
GE
$79.93 (1.30%) $1.03
Federal National Mortgage Association Stock Quote
Federal National Mortgage Association
FNMA
$0.66 (-0.08%) $0.00
The First Marblehead Corporation Stock Quote
The First Marblehead Corporation
FMD
VOLCOM, Inc. Stock Quote
VOLCOM, Inc.
VLCM.DL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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