I continue to be amazed that for-profit educator Career Education (NASDAQ:CECO) is indeed profitable, despite its investigation by the Securities and Exchange Commission on the one hand and shareholder lawsuits on the other. Forget about the legal fees the company is incurring to defend itself against the lawsuits and to justify itself before the SEC. Forget about the cost of the internal self-examination of its business practices, with bills mounting by the hour at retained law firm McDermott, Will, & Emery and consulting firm Navigant. Just dealing with the day-to-day PR damage control, including intermittent blowups such as January's 60 Minutes special on the company, must make it terribly difficult for Career Education to focus on carrying out its business plan.

But judging from Tuesday's earnings release, the company is managing just fine.

OK, that's my opinion. The market apparently disagrees with me, since it's already sold off the company's stock by 6% in reaction to the earnings report. But here's why I'm right and all the suits up on Wall Street are wrong:

Over the past year, Career Education has more than doubled its cash on hand to $348 million, so its net cash (after subtracting long-term debt) now totals $326 million. The company generated this pile of money by throwing off copious amounts of free cash from its operations. In the fourth quarter just completed, Career Education generated $66 million in free cash flow. The company again failed to provide a cash flow statement with its earnings release -- and yes, this on-again, off-again approach to revealing material financial information is getting a bit annoying. But if we take last quarter's running total of $166 million in FCF generated through Q3 2004, and add to that the new information, it appears that the company has once again surpassed my predictions for its generation of unencumbered cash. If you'll recall, in October I was positing an estimate of $220 million or so. New total: $232 million for the year.

Based on its reported net cash of approximately $320 million, I now put the company's enterprise value at roughly $3.7 billion. Divide that by its free cash flow, and Career Education's EV/FCF comes to 16. Weigh that valuation against the company's 33% top-line growth in Q4 -- the 39% that earnings would have grown but for a charge for student bad debt and a few conservative accounting changes -- and against consensus analyst estimates of 25% profit growth over the next five years, and Career Education looks attractively priced at this level. The only reason I'm not yet buying is that I suspect the price could get even better in the event of an adverse finding by the SEC and/or the company's own special committee investigating the alleged accounting improprieties. Bargains are great -- but great bargains are better.

Check out the recent performance of Career Education's for-profit educator peers in:

Fool contributor Rich Smith owns no interest in any of the companies mentioned in this article.