Capella Education Is In Free-Fall, Trend Could Continue (CPLA)

Looking at the chart of Capella Education (NASDAQ: CPLA), reveals that the shares have been in complete free-fall in August. During today's trading session, CPLA has fallen 13.45% to $60.76. The stock was trading above $90 at the beginning of the month.

Today, the Department of Education released data pertaining to repayment rates of student loans at more than 5,000 educational institutions, both for-profit and not-for-profit. The data showed that only 40% of the school's former students are repaying their loans, which is below the 45% minimum targeted by the Department of Education.

The government has said it may cut off schools' access to federal student loans if enough graduates are unable to pay back their loans, which would slash the bulk of for-profit schools' revenue.

Capella (CPLA) is disputing the data. In a statement, Capella's CEO Kevin Gilligan said the company's own analysis found that more than 45% of former students are paying back their loans.

"We have reached out to the Department of Education, requested a sharing of the underlying data and methodology to understand any inconsistencies and look forward to an expedited, constructive dialogue," he said.

The move in shares of CPLA has been dramatic, but it may continue. Considering the potential draconian consequences that this report may have on CPLA's business model, the company's market cap and valuation may still be too high.

The stock trades at a forward P/E of 12.77 and has a market cap of $1.02 billion. When looking at CPLA's valuation versus Apollo (NASDAQ: APOL), a for-profit education company who is getting a boost after today's report, and the shares continue to look expensive. APOL trades at a forward P/E of only 7.42.