WHITEFISH, MT / April 22, 2014 / The U.S. has 13 federal agencies that have committed over $3.4 billion to more than 250 different programs supporting Science, Technology, Engineering, and Mathematics ("STEM") programs, according to the Association of Science and Technology Centers ("ASTC"). Despite these investments, the World Economic Forum ranks the U.S. 52nd in the quality of mathematics and science education.
Creative Learning Corporation's (CLCN) LEGO(R) Bricks-based afterschool programs could be the solution. Through its Bricks 4 Kidz(R) franchise, the company provides a safe learning environment that introduces engineering, math, and science principles through multiple learning modalities. These programs are available through over 500 franchise locations across the U.S. and 26 other countries.
In this article, we'll take a look at the growing market for STEM education, Creative Learning Corporation's solution, and why investors may want to take note.
STEM Education Gets a Boost
STEM education attracts a sizeable investment from the U.S. government, but children don't seem to be improving by many measures. According to the Department of Education, only 16% of American high school seniors are proficient in mathematics and interested in a STEM career. In fact, the U.S. ranks 25th in mathematics and 17th in science among industrialized nations.
Between 2010 and 2020, the agency estimates that STEM subjects will see a significant increase in demand relative to other occupations. Biomedical engineers, medical scientists, systems software developers, computer systems analysts, and mathematicians are expected to see increases of 16% to 62% over the timeframe relative to a baseline increase of 14% across all occupations.
President Obama recently proposed $170 million in additional funding to help train the next generation of innovators through a variety of programs. Among other things, these programs will "prioritize hands-on learning to increase student engagement, interest, and achievement in the STEM fields" with the bulk of the spending going towards adoption of STEM practices in P-12 education.
Hands On with Creative Learning
Hands-on learning has been shown to be far more effective than simple visual or auditory learning. In a 2009 Purdue University study, researchers found that students that used hands-on learning were able to use drawings, words, or phrases to explain STEM concepts better than those learning the same material via lecture, particularly among non-native English speaking children.
Creative Learning Corporation's Bricks4Kidz(R) is a franchise offering programs designed to teach the principles of engineering, math and science to children ages 3-12+ using LEGO(R) Bricks. Classes are provided in school/afterschool, at special event programs, and at day camps designed to enhance and enrich the traditional school curriculum by triggering imagination and building confidence.
If the video above does not display, please click here to see a short video on the Bricks4Kidz@ program: https://www.youtube.com/watch?v=tKUh-4K6jpI
After acquiring the franchise in July of 2010, the company quickly built it into a leading educational franchise named #1 Best Children's Enrichment Program Franchise and #2 Top New Franchise by Entrepreneur Magazine. The company has over 500 franchisees located throughout the U.S. and internationally, representing a high-growth business model that continues to build momentum over time.
The company has also been developing related Challenge Island franchise that aims to reinforce STEM and core language arts skills. Children are divided into cooperative tribes and take on a vast array of challenges, encouraging critical thinking and analytical skills, oral communication and interpersonal skills, and problem solving. Currently, the company has attracted 18 franchisees and plans on expanding its marketing.
Investing in STEM Education
Investors looking to capitalize on the growth in STEM education have a few different options. Companies like LeapFrog Enterprises Inc. (LF) manufacture educational toys, making them a better option than generic toy companies like JAKKS Pacific Inc. (JAKK). However, even LeapFrog doesn't offer direct exposure to STEM like Creative Learning Corporation.
Creative Learning Corporation generates franchise fees of $25,000 upfront and $5,000 per year to renew plus a 7% royalty and 2% marketing fee on all sales. These initial and recurring revenues resulted in strong revenue growth from $1.58 million in 2011 to more than $4.82 million in 2013. On the bottom line, the company swung to a profit in 2011 and generated net income of $948,000, or $0.08/share, in 2012.
Despite its rapidly growing revenue, the company trades with a price-earnings multiple of just 26x its trailing 12-month earnings per share. These metrics suggest a price-earnings to growth ratio of just 0.2x, which is significantly lower than the 1.0x multiple that many investors consider to be "fair value". As a result, investors may be able to buy into the STEM opportunity at an attractive price.
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SOURCE: TDM Financial