Reasons For Low Multiples For Listed Colleges
November 09, 2009 7:48 AM
Barron's wants to know why is the “for profit” college education sector quoting at low multiples? This was despite record enrollments ranging between 20 - 50% for some of the listed companies like Apollo Group, Inc. (NASDAQ: APOL) in the sector.
It may probably be due to cases like a student who had to withdraw from his medical residency. The reason: the training he received in a “for profit” college needs more buffering in the form of further education.
So, Barron’s is of the opinion that if the sector is unable to offer value to its customers (students), then, Wall Street will continue quoting low multiples for the sector’s stocks. There seems to be “scarce evidence” that these colleges are delivering better results than the traditional institutions. Numbers from the Educational Department also indicate that drop-outs from these for profit colleges are also similar to the ones reported by the traditional ones.
