Last Friday, investors gave Plato Learning (NASDAQ:TUTR) an A+ for its recent performance as the stock surged 18.90% to $8.62.
The company is a leader in computer-based and e-learning instruction, with offerings for kindergartners up to adults. However, the K-12 market has been fairly weak because of federal and state budget cutbacks. Those firms that focus on the adult segments -- such as Career Education (NASDAQ:CECO), Corinthian Colleges (NASDAQ:COCO), Strayer Education (NASDAQ:STRA), Laureate Education (NASDAQ:LAUR), and Apollo Group (NASDAQ:APOL) -- have been enjoying much more growth. But even this segment has recently come under pressure.
As for Plato Learning, it is still a believer in the prospects for K-12 training and over the past few years was able to make a variety of savvy acquisitions to bolster its business. The most critical has been Lightspan, which is a leader in providing online assessments for students. In fact, Congress passed the No Child Left Behind Act, which requires assessments for schoolchildren.
It was this acquisition that supercharged Plato's results last quarter. The company posted revenues of $40.6 million last quarter, which compares with $23.8 million in the same period a year ago. Earnings were $6.7 million, which compares with $285,000 in the same period a year ago.
Well more than a majority of Plato's revenues come from the K-12 marketplace, according to its conference call. Unless Plato Learning buys other companies, then, its future growth is largely dependent on increased spending from state and federal sources. Unfortunately, this is something that will likely take a few years.
Fool contributor Tom Taulli does not own shares in any of the companies mentioned in this article.
