Apollo Group (NASDAQ:APOL) seems to be on double secret probation this year, with its stock down 14.4% since January 2006. It's not alone; rivals like Career Education (NASDAQ:CECO) and Laureate Education (NASDAQ:LAUR) have watched their stock plateau or drop in the same time frame. However, Apollo's unique advantages could eventually translate into outstanding returns for both investors and Foolish students alike. Let's review Apollo's latest earnings report to see whether it made the grade.

Apollo's yearly earnings rose only about 2% from last year, with revenues up 5.6% to $653.6 million. Those numbers aren't particularly inspiring, but they don't indicate a decline in the business model, either. The report contained another key indicator of future revenue: Associate's-degree enrollments at Apollo's University of Phoenix jumped 94% to about 66,100, while bachelor's-degree enrollments declined about 5% to 156,400. This might be good news for Apollo, since associate's degrees tend to lead to bachelor's degrees. The current decline in the latter doesn't much worry me at present.

The best reason to invest in Apollo, in my opinion, is the disruptive potential of its well-known University of Phoenix. For-profit institutions like the U of P, with its convenient classes over the Internet, are attracting many people who might never have otherwise pursued traditional college degrees. Tapping this eager market has fueled tremendous growth for Apollo, with revenues approaching $2.25 billion in 2005.

Traditional institutions of higher learning are having a difficult time with this approach, since they strive instead to offer the best education to the best students. The traditional school model is built to support that mission, with expensive, high-profile faculty, high tuition costs, and highly selective admissions. Traditional M.B.A. programs, for example, work well for those with the necessary time and resources, but companies increasingly can't afford to lose their talent for a two-year full-time program.

Witness the rise of corporative universities such as GE's (NYSE:GE) famous Crotonville campus. These programs are developed to focus specifically on the talents GE wants its top managers to have, and they're available when it is most convenient for the managers to learn. Harvard could never offer this level of customization. The GE approach also opens an opportunity for many managers who, like Apollo Group's students, would never consider studying for a M.B.A. otherwise, but still need the lessons encapsulated within the traditional program.

Our highly distinguished schools are on the top of their game, with applications rising and thousands of families willing to fork over hefty tuition costs. But Apollo and other educational providers are emerging as a low-cost threat, offering customization and opportunity to thousands of people traditional colleges might never reach.

So what does this Fool think of Apollo's stock, trading just above its 52-week low? Not surprisingly, it looks intriguing, if a touch expensive on a price-to-free cash flow basis. As a blue chip with impressive long-term potential, Apollo could be worth investors' consideration for a small position, expanded over time through dollar-cost averaging. It might just be a smart investing move.

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Fool contributor Stephen Ellis' holdings can be viewed here. He does not own shares in any companies mentioned. The Motley Fool's disclosure policy is at the head of its class.