Bridgepoint Is Now an Even Stronger Buy by Brian Grosso:
- February 21, 2013 the University was placed on Notice due to concerns about its capacity to meet the newly revised criteria effective January 2013 and its current non-compliance with HLC's substantial presence policy.
- Accreditation is no longer an immediate problem for the company. This removes much of the risk from BPI that still exists for other for-profit companies.
- Everything I read on this industry, whether it be the Congressional report, letters from accreditors, or direct filings from companies, seems to be written in such a way as to assume for-profits will continue to exist. Several for-profits, Bridgepoint included, seem priced for bankruptcy, but the company's incredibly strong balance sheet and what I just mentioned make bankruptcy and closure seem unlikely.
- Bridgepoint was not placed on 'Notice' primarily because of anything to do with poor educational quality, corrupt business model, etc. HLC's reason for placing BPI on notice is that the majority of the company's operations are in San Diego and its colleges are in Iowa and Colorado.
- HLC clearly wants BPI to stay accredited. BPI will now have time to reapply for accreditation from WASC. HLC has asked for official updates regarding this endeavor.- If you do end up investing in BPI, be prepared for earnings to decline between 10% and 30% next year.
- You should also be prepared and waiting to hear the results of the 'qui tam' lawsuit against the company related to commission-based recruiter pay in the past. Expect the share price to jump at some point when the market recognizes the value of the company and the significantly lower accreditation risk present now that the company got placed on notice.
- Educational expenses will likely rise and revenues will decline slightly, which will cause the decline in earnings I mentioned.
- Disclosure: I may initiate a position in BPI in the next 72 hours.
Brian Grosso is a Drexel University student who did nothing more than a cursory level numbers analysis and then sprinkled pixie dust on it. He likely owns shares of BPI in that he saw fit to put out 3 articles in 3 days on the company (and more since), offering up various off the wall analyses as to why the stock is undervalued. However, even with his glorious proclamations, the stock is down, while the market is hitting records highs.
Your posts, as well as Mr. Grosso's are clear indications that this market is once again overextended as the naive folks play games making yourselves out to be analysts of some sort. Since when are college kiddies so knowledgeable about the markets and stock analysis? It seems we are revisiting the years of the bubble burst last time around. Remember, as Cramer toured college campuses with his Mad Money show teaching all the kiddies about trading and they'd all ask him about their favorite stocks - which they'd regurgitate out of those he loved most....such as DryShips. Remember Cramer and the kiddies pumping that garbage at $70 and higher? So funny and pathetic.
Your trade won't be as lucky for you as the last one.
From the Motley Fool: How for-profit educators measure up.
Bridgepoint Education (NYSE: BPI) has already started to show cracks in its business. In October 2012, Bridgepoint announced that the Justice Department was investigating the company’s compensation practices for its admissions personnel. The company’s most popular school, Ashford University, was accused of spending more money to enroll new students than it did to teach them. Adding insult to injury, Ashford University was denied accreditation by the Western Association of Schools and Colleges in July 2012, although it remains accredited by the Higher Learning Commission. With its most popular school reapplying for accreditation at the Western Association of Schools and Colleges, Bridgepoint receives an “F”.
First of all, it looks like he is jumping to a conclusion that HLC’s action to put Ashford ‘on notice’ was due primarily to the ‘substantial presence’ requirement. A simple reading of the public notice demonstrates that the ‘on notice’ was due to both location and academic issues.
Secondly, the public disclosure notice from HLC is still citing Ashford for non-compliance with the same areas as before (retention, faculty, governance, resource allocation, and assessment). It doesn’t look like Ashford wasn’t successful in resolving any of the major concerns raised by either WSAC or HLC. This is troublesome since most of the information used to respond to the HLC team visit was probably also used in preparing their report for the special team visit from WASC this coming month.
Most importantly, the author’s ROA analysis only estimates a slight decrease in enrollments which is widely optimistic.