Test preparation company Princeton Review (NASDAQ:REVU) announced its third-quarter and year-to-date results on Friday, and they weren't pretty. For the quarter, revenues declined 8% versus Q3 2003, even as year-to-date revenues rose 11% against the first nine months of 2003. On the earnings front, Princeton transformed last year's $0.11-per-share profit into a $0.02 loss for the third quarter. Year-to-date results also disappointed; last year's first-nine-months $0.08 profit became this year's $0.03 loss.

The rest of the year doesn't look much more promising for the company. In the best-case scenario, Princeton expects to earn between nothing and $0.02 a share in Q4 -- meaning it will end the year in the red no matter what. In the worst case, the company may be forced to take a noncash charge that will just increase the size of its full-year loss. Either way, the chances that the company will meet consensus estimates for either next quarter or full-year 2004 seem small.

In short, Princeton is serving its owners pretty poorly in its mission to make them money. But to be honest, that's only second on my list of two reasons why I would never invest in this company. No. 1 by a long shot is that Princeton, like rival Kaplan Inc. (a unit of The Washington Post (NYSE:WPO)), is in the business of preying on the insecurities of teenagers (and their parents). This isn't a company that imparts knowledge, folks. It's the opposite of "peer" educator Educate (NASDAQ:EEEE), which actually teaches the three R's of reading, writing, and arithmetic, or higher-education specialist Apollo Group (NASDAQ:APOL), which teaches useful skills to adults.

Not to put too fine a point on it, Princeton teaches kids how to game the system, boosting their test scores so they can get into "name" colleges when their actual academic skills are too weak to do the trick. Thus it treats the symptom rather than the disease. Even worse, by selling the promise of better test scores (for a price), Princeton tends to frighten poor and middle-class families into -- most un-Foolishly -- straining their finances just to keep up with their wealthier classmates.

Personally, I put Princeton in the same class as companies such as Weight Watchers International (NYSE:WTW), NutriSystem (AMEX:NSI), and eDiets.com (NASDAQ:DIET). The latter market to the insecurities of the overweight. Meanwhile, Princeton (and, yes, Kaplan too) preys on the angst of the academically pudgy. Either way, had I my druthers, I'd consign the lot of such companies to Tim Beyers' list of companies that I wish were private.

Prefer to put your money to work in companies whose services increase knowledge rather than test scores? Read all about the for-profit educators in:

Fool contributor Rich Smith has no interest, short or long, in any of the companies mentioned in this article.