The Dow is up 20% year to date. Quantitative easing aside, stocks are on a roll and companies are profitable, but for many that profitability is tenuous at best. While many sectors are gaining profits from smaller staff and automation, post-secondary education firms make money the old fashioned way — they earn it. Despite recent scrutiny from the media, analysts, and regulators, business has been brisk for the post secondary industry.
Many Americans have gone back to school in hopes of gaining the skills they need to obtain employment in this jobless recovery. The publicly traded post-secondary education industry is often the only option for many Americans who need to retool for the future. Three firms are poised to profit from this recent trend: Strayer Education (NASDAQ:STRA), Capella Education Company (NASDAQ:CPLA), and Grand Canyon Education (NASDAQ:LOPE).
Strayer Education is a star pupil for many in the equity markets; for instance, the firm has recently been upgraded to "Buy" from a "Neutral" rating by McLean Capital Management. Strayer has made significant gains in its online learning products and services. Equity markets no doubt like Strayer's insistence on adding value in an often stodgy education marketplace. Capitalizing on recent trends, Strayer added a Cybersecurity graduate degree program to bolster its already popular undergraduate and graduate degree programs.
Continually offering exciting and popular degree programs that people want to study and employers crave is Strayer's goal. The stock is up over 20% this year and lists at under $50 per share. What sets this stock apart is its whopping $10.60 dividend yield and a healthy $4.78 earnings per share. This company's shares earn an A.
Grand Canyon Education is a bigger firm with a market cap of $2.02 billion. By improving its campuses and upgrading existing degree programs, Grand Canyon Education has continued to add value.
Grand Canyon has focused on luring well-qualified students by lowering tuition while offering competitive degree programs for fiscally-minded students. The firm also focuses on providing a great work environment to create real value for students and investors. Forbes named Grand Canyon Education it's second best small company in America, and this is a company that is poised for more success. Grand Canyon has grown steadily YTD — up 102%. With a P/E of 26, Grand Canyon is the best growth stock of the post-secondary education sector. Institutional ownership is strong at 111% — it seems many are sold on Grand Canyon's approach.
Capella Education is headed in the right direction. Capella has invested in FlexPath technology to create competency-based learning. Using FlexPath, Cappella creates programs, materials and support that meets professional standards. Capella's approach helps adult learners looking to learn new skills to get an education that corresponds to potential employment.
The company's stock has increased 11% this month alone. While enrollment fell 1.4% at the firm's flagship Capella University, revenue increased 1.4% for the fourth quarter. America has reached a tipping point, as the cost of post-secondary education is increasingly becoming too much to for many to bear. High tuition, increasing student loan debt and a stingy labor market have caused enrollments to decline across the board. Demographics, social and economic realities have finally caught up with some firms in the education industry. Choosy students have shunned Capella's limited degree programs, though Capella is aggressively working to change this trend. Falling enrollments aside, the stock has been a strong performer — up 124% for the year. With a "Buy" rating and a new price target of $55 from BMO Capital Market, this is a great post-secondary education investment.
These firms continually added value in the post-secondary education industry. Many investors don't look to this industry for value, though, as diploma mills have tainted this industry. These bad eggs aside, the post-secondary education industry is profitable and growing. As these firms expand and more students enroll, growth will come at the expensive of traditional universities. Strayer, Capella, and Grand Canyon Education will profit because they provide affordable academic quality.
John Moore has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.