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Career Education Corp. Message Board

  • jenniferremington1990 jenniferremington1990 May 16, 2013 1:14 PM Flag

    Cash & Book Value

    Just a couple of quick questions:
    (1) Is there any catch with the level of cash they have on hand? Looks like they have well in excess of stock price which doesn't seem correct.
    (2) Also are there any contingencies that I should think of with the book value? Looks like they have a book value near $9.
    (3) Any potential lawsuits outstanding that I need to be worried about?

    All things considered this looks pretty cheap.

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    • Regarding the cash, they have some off-b/s op lease obligations that are contractual claims on a good chunk of that cash, so operating cash flow would likely turn positive well after operating profits do. But I still think that leaves the company with a negative enterprise value even with a year more of losses. This stock is going to push upward, with some resistance from Blum Capital's selling as it divests its remaining 5MM shares.

    • As frrol4ever points out, there are some flaws with thinking that the book value of $8.90 is a relevant figure. I wouldn't put much value in the PP&E and their book liabilities are understated due to how operating leases are accounted for (they are not considered debt yet they are contractual obligations). Their operating lease commitments can be found in the 10K. They are substantial.

      In terms of cash/share, it has been previously disclosed that much of the cash is restricted for various reasons so someone buying the business wouldn't get all of it.

      Lawsuits are disclosed if material. The bigger issue for CECO has been government oversight and the lack of quality in their programs (things such as Gainful Employment metrics, etc)

      Suggest you focus on: new enrollment trends, total enrollments and cash flow.

    • Do we know why Blum has been dumping shares at what has been the lowest price in many, many years? They were none too bright to get long this stock in the first place, at what had to have been substantially higher levels. So I'm thinking they are none too bright bailing between $2.05 and $3.00. They appear to be an excellent contra-indicator, sell when they buy, and buy when they sell.

      Sentiment: Hold

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