Bear of the Day: American Public Education (APEI) - Bear of the Day
It is appears as though the golden age in for-profit education companies is nearing an end. Students are starting to question the value of degrees from many institutions in this space, while the government seems poised to move more student loan debt into a position that can be wiped out in bankruptcy.
If these trends weren’t enough, many ‘traditional’ schools have moved into the online university realm, dulling the appeal of some for-profit education centers in the process. So clearly, competition and a changing environment are really having a negative impact on a number of companies on this space, making them very precarious investments right now.
One company that exemplifies this negative trend is undoubtedly American Public Education (APEI). This for-profit education company focuses on two segments—American Public Education and Hondros College of Nursing—and it has been under pressure in this difficult environment.
The company has seen wild swings lately, and shares are easily underperforming the S&P 500 both YTD and over the past year. But unfortunately for APEI, this doesn’t look likely to be the end of the trend by a long shot. This is especially true if investors look to recent earnings estimate revisions which suggest that more pain is on the way.
Recent Earnings Estimates
Analysts appear to be universally bearish on APEI’s recent prospects, as it is nearly impossible to find someone who has raised their outlook for the company’s earnings in the past two months. Instead, we have witnessed six revisions lower in the past thirty days for the full year period, and four lower in the past 30 days for the current quarter.
But it is the magnitude of these revisions which is the real story, as analysts now expect APEI to earn just 49 cents a share in earnings this quarter, a far cry from the 62 cents a share that was projected just a month ago. It is now expected that APEI will have a year over year earnings contraction of over 16%, further showcasing the bearish short term trend.
And though the short term appears weak, there should also be concern over the long haul too. Analysts are now looking for an earnings contraction of 7.3% for the full year, while earnings estimates for the next year time frame have collapsed from $3.12/share 30 days ago to just $2.31/share today.
Clearly, analysts are getting extremely bearish about the prospects of APEI in both the near and long term. And though the company has shown a strong record when it comes to beating estimates, the recent activity in the stock and the bearish predictions by analysts are hard to ignore. For these reasons, it shouldn’t be surprising to note that APEI has earned itself a Zacks Rank #5 (Strong Sell) and that we are looking for more underperformance from the company in the months ahead.
Other Picks
While the schools industry is pretty weak right now, there are actually a few standouts in the space still. In particular, Universal Technical Institute (UTI) stands out as a promising choice.
Not only is the stock expected to see double digit EPS growth this year and the next, but it has a Zacks Rank #1 (Strong Buy) as well. So if you are looking for some more schooling in your holdings, make sure your portfolio attends UTI instead of APEI, as the current earnings estimate picture definitely favors Universal Technical Institute right now.
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