Right Time for Strayer Education? - Analyst Blog

On Apr 4, 2014, we issued an updated research report on Strayer Education Inc. STRA.

On Feb 21, this post-secondary education provider reported strong fourth quarter 2013 results on the back of improvement in new enrollment trends. Despite declining year over year, Strayer Education beat the Zacks Consensus Estimate for both earnings and revenue in the quarter.

Strayer has been witnessing weak enrollment trends due to continued unemployment, overall economic downturn and subsequent decline in student demand. In order to address the concern, the board of trustees approved an approximate 20% cut in Strayer's undergraduate tuition costs.

The new tuition fee has been put into from Jan 1, 2014. The initiative improved college affordability and its value proposition, and thus, attract cost-conscious students. The combination of lower undergraduate tuition fee and the Graduation Fund (which offer financial assistance to students in the final year of their programs) is expected to cut the cost of a Strayer University degree by 25%. In fact, the company's enrolment trends have started improving lately.

In the fourth quarter of 2013, though undergraduate new enrollments declined, the rate of decline narrowed from the previous term. Moreover, this Zacks Rank #1 (Strong Buy) education company witnessed a double-digit increase in new graduate enrollment during the quarter, which is encouraging.

Revenue per student also grew in the quarter owing to higher student retention rate.
 
However, the company expects revenue per students to decline in each of the quarters of 2014 due to cuts in tuition costs – which keeps us concerned.

Key Picks from the Sector

Some other stocks in the education sector include Corinthian Colleges Inc. COCO, K12, Inc. LRN and Apollo Education Group, Inc. APOL. While Corinthian Colleges sports a Zacks Rank #1, K12 and Apollo Education carry a Zacks Rank #2 (Buy).