1 Remarkable Statement About For-Profit Colleges (In 6 Charts)

These graphs were produced by Capital Market Labs. Learn how the company is bringing the power of living data to the world of finance.

The for-profit college industry suffered through a brutal 2014. A harsher regulatory environment has led to declining enrollments, deteriorating financials and plummeting stock prices.

The following chart paints an ugly picture, plotting total revenue, one-year growth percentage on the x-axis and one-year earnings from continuing operations growth on the y-axis.

Graham Holdings Co GHC stands out as the big growth story, but the reality is that it is a conglomerate, and its educational division actually saw almost no revenue growth over the last year.

So, let’s remove Graham from the peer group and focus on the remaining companies.

This is a very different picture. Just two companies managed to grow both revenue and earnings from continuing operations: Capella Education Company CPLA and Grand Canyon Education Inc LOPE.

Grand Canyon is the clear standout however.

It is the only for-profit college showing substantial growth in both categories. On the opposite end of the spectrum are some of the bigger names in the space, like Strayer Education Inc STRA, Apollo Education Group Inc APOL and Bridgepoint Education Inc BPI. Bridgepoint, in particular, stands out because of a steep decline in both revenue and earnings from continuous operations.

Let’s focus in now on these two extreme firms.

First, look at revenue trends across time. Although Bridgepoint and Grand Canyon currently have very similar revenues, they took very different paths to get to where they are today.

Bridgepoint exhibits a classic boom-bust pattern, while Grand Canyon displays a consistent, monotonic growth in revenue.

A similar story emerges when one looks at continuing operations margin.

Bridgepoint shows rapid growth, a peak, and rapid decline. Grand Canyon, on the other hand, displays more modest growth, but sustainable growth that has continued to the present.

Next, look at net income and again see the same pattern. Bridgepoint’s net income surged dramatically until it reached its peak in late 2011, and it is now on the verge of losing money.

Meanwhile, Grand Canyon’s growth is steady and unending.

Finally, look at valuations measured by price to sales. Grand Canyon is clearly being rewarded by the market for its superior performance with a higher valuation.

While Grand Canyon has a higher valuation than Bridgepoint, the reality is that the market has not been impressed. Grand Canyon, despite its consistent record of growth, is down almost 9 percent in the past year.

In fact, Grand Canyon is so concerned about the stigma associated with the for-profit college industry it is considering buying out its shareholders and converting to a non-profit college.

That’s a remarkable statement about the for-profit college industry: Its only company with any growth is trying to distance itself as much as possible from peers.

Tom White can be found on Twitter @tbwhite67

Image credit: Eric James Sarmiento, Flickr