I agree. That 7.5% increase is huge and it is what everyone has been waiting for! They will definitely have to explain the drop in persistence and avg revenue (both the lowest I have ever seen since following these guys), which no doubt led to the revenue & EPS miss. My guess is the opp scholarships are cutting into avg revenue and large graduating class caused the drop in persistence.
So last night I noticed my revenue estimate of $257M is for QIII not QII. QII is actually $273M. I took a lot of profit off the table today because I couldn't really see a scenario where they can hit $273M. I think they will beat EPS and show stabilization of starts but I don't know if that will be enough with a potential revenue miss. I have made way too much money to risk it. I am still a big fan of ESI long term and I'm holding a little in case I'm wrong. I hope I'm wrong and we see the epic squeeze that seems to be all but inevitable.
My guess is they will come in at $260M beating current estimates of $257M. My assumptions are 70% persistence rate (company stated to expect -1%-1.5% reduction in next two quarters), starts of 15,698 (flat YOY, very realistic given recent trend), and avg revenue per student of $4,450 (company est -4% YOY remainder of the year). Therefore; $260M = ((61,039*.7)+15,698))*$4,450.
I can't wait to watch a little supply and demand at work when shorts try and cover their 9M shares from a float of 14m.
The majority of people that follow the for profits will tell you enrollment starts are the lifeblood of these companies. They drive revenue and profitability. And thanks in part to the opportunity scholarship and lower comps (only have to beat 15K from 2012) on July 25th you will see YOY growth in starts. I believe that will start the covering in earnest. I can't wait to watch you and all of you short buddies fight over the 14 mil shares that are available. Good luck! :)
I recently started following these guys a little. To answer your question I would say yes. In QI they reported an all in cost of R381,347 per kg and in June they stated they would bring it down to R361,000 per kg in QII. At last glance the price of gold was around R400,000 per kg. Not a huge margin by any stretch but a margin nonetheless although I'm sure I'm oversimplifying it.