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Capella's Programs Get Approval

Zacks Equity Research

Capella Education Company (CPLA) recently received approval from the Higher Learning Commission (:HLC) for its two FlexPath programs - Bachelor of Science in Business and Master of Business Administration (MBAIF). Capella needs further approval from the U.S. Department of Education before offering the programs to its students.

The format followed under the FlexPath programs reduces the cost and duration of the course. It also tailors programs according to the requirements of the job market. Under the FlexPath model, the assessment of a program is based on achieving the required competencies and application of learning rather than on time span.  

The company’s FlexPath programs cater to the latest market demand for short and cost-effective courses. This demand particularly comes from working adults, who prefer to upgrade their skills while maintaining their job. The recent approval of the FlexPath programs is likely to contribute to new enrollment growth in the upcoming quarters.  

Capella Education recently surpassed the Zacks Consensus Estimate for earnings and revenues in the first quarter of 2013 on the back of better-than-expected enrollment growth. New enrollments grew 8.2% year over year, far exceeding management’s expectation of a 5% increase. Enrollments benefited from high-single digit increase in bachelor degree enrollment, better-than-expected performance in Master’s degree enrollment and stabilizing demand for doctoral programs.  

Interestingly another education company, Apollo Group, Inc. (APOL) surpassed the top- and bottom-line estimates when it reported its results for the second quarter of fiscal 2013 on Mar 25. We believe that Apollo beat estimates on the back of cost savings resulting from its restructuring efforts.

Capella carries a Zacks Rank #3 (Hold).

Education stocks such as New Oriental Education & Technology Group (EDU) and Grand Canyon Education, Inc. (LOPE) are currently performing well and are worth considering. New Oriental Education & Technology Group carries a Zacks Rank #1 (Strong Buy), whereas Grand Canyon Education holds a Zacks Rank #2 (Buy).

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