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UPDATE: Stifel Upgrades DeVry Education On Improving Fundamentals

Alex Cho

Stifel upgraded DeVry Education (NYSE: DV) from Hold to Buy and raised the price target to $48.

Stifel offered its upgrade because DeVry's earnings are “troughing,” the company is well-positioned in its respective space and because the stock trades at a reasonable valuation.

Stifel on troughing earnings:

“Earnings are “troughing” and could turn positive in 2015 after uninterrupted decline from peak of $4.67 in 2011. Our 2014 estimate is $2.50 and our 2015 estimate is $2.55.”

Stifel mentioned the reasonable value the company trades at when compared to its peer group:

“Stock is off from its recent high of $46 and at $40, the stock currently trades at 14.1x our FTM EPS estimate vs. the peer group of American Public Education, Apollo Education, Capella Education, Grand Canyon Education, Strayer Education of 17.1x.”

Stifel likes the business itself, and believes that certain areas of DeVry Education are extremely well positioned:

“Mix shift cushions and enables growth: The core DeVry University Business, Technology and Management (BTM) has been weak and have been the key source of recent earnings decline. Yet its growing Medical and International business are now large enough to offset the weakness in BTM and in effect will generate ALL the earnings in 2015 while the DeVry BTM business should break even.”

DeVry Education recently traded at $40.37, and may have 17.64 percent upside based on the analyst's recommendation.

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