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Why Grand Canyon Shares Leaped

By Brian D. Pacampara, CFA - Nov 2, 2012 at 3:44PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of for-profit educator Grand Canyon Education ( LOPE 1.37% ) soared 13% today after its quarterly results and outlook easily topped Wall Street expectations.

So what: For-profit educators have struggled amid new regulations and increased government scrutiny, but Grand Canyon's impressive third-quarter-- earnings spiked 44% on revenue growth of 17% -- coupled with upbeat guidance for the fourth helps ease some of those long-standing concerns. In fact, Grand Canyon's enrollment surged 17.5% to 52,300 versus 44,500 in the year-ago period, giving investors plenty of good vibes over a sustained industry turnaround.

Now what: Don't expect the operating tailwinds to slow anytime soon. Management now sees fourth-quarter EPS of $0.41 to $0.42 on revenue of $135 million to $136 million, nicely ahead of Wall Street's view of $0.38 and $129.5 million, respectively. Of course, when you couple the uncertainty that continues to surround the sector with Grand Canyon's 52-week high-hitting, 20 P/E-sporting stock price, buying into the momentum seems particularly risky at this point.

Interested in more info on Grand Canyon? Add it to your watchlist.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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$75.33 (1.37%) $1.02

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