Source: American Public Education.

It isn't easy being a for-profit post-secondary educator these days. Prospective students are hesitant about taking on student loan debt. There are concerns about the effectiveness of Web-based programs. Regulators have also voiced concerns about uninspiring student repayment rates, and even the marketing tactics of a few bad actors. 

American Public Education (NASDAQ:APEI) has been historically seen as one of the better players in this niche, but it's hard to grow when the trends are working against you.

American Public Education posted its financial results for the third quarter after Thursday's market close. Revenue may have increased 4%, to $84.7 million, but there's a juicy asterisk to that growth. The company acquired the Hondros College of Nursing in November of last year, and that inflated this year's consolidated results by $7.5 million. American Public Education's legacy business -- material because it still accounts for 91% of the revenue -- actually saw its revenue decline by nearly 6%. 

Enrollments fell at its namesake business. Net course registrations at American Public University are 5% lower than they were a year ago. Making matters worse, net course registrations for new students have plunged 11% during the past year.

Providing Web-based college programs is naturally a scalable model. When enrollments and revenue slip, it's a safe bet that profitability is going to fall even harder. American Public Education's operating profit slipped 17%, and net income plunged 19%, to $8.8 million or $0.51 a share. That was actually in line with analyst estimates, and revenue actually clocked in slightly higher than the $82.7 million that Wall Street pros were targeting.

Farewell to arms
American Public Education stands out among online educators because of its emphasis on recruiting military personnel and their families. This has helped offset some of the wild swings experienced at other for-profit post-secondary institutions, though leaning on the Department of Defense for student subsidies naturally comes with budgeting risks.

It could have a gem in last year's acquisition of Hondros, even if it's still too small to move the needle. Unlike the online-based curriculum that American Public Education is known for, Hondros trains prospective nursing students at a physical campus. The enrollment level is small at Hondros. There were just 1,311 students as of the end of September, contrasting the 100,200 net course registrations at American Public University. However, Hondros is actually growing in popularity with net student enrollment and total student enrollment up 6% and 8%, respectively, during the past year.

Things should start to improve at this point. American Public Education sees a profit of $0.50 a share, to $0.54 a share, on 7% to 9% in revenue growth for the holiday quarter. At the midpoint of its earnings guidance, we would be looking at slight bottom-line improvement from the $0.51 a share it earned a year earlier. 

American Public Education sees net course registrations increasing by 6% to 8% during the fourth quarter relative to last year with a 16% spike in new student enrollment at Hondros. Challenges remain, but it's refreshing to see guidance pointing to modest growth for all of the metrics that matter.