For-Profit Education Stocks: Are They Investment Grade?

Tickers in this article: APOL COCO DV STRA
NEW YORK (TheStreet) -- Every great teacher understands that a student, despite his or her personal obstacles, will rise to the level of expectations. But recently, for-profit education companies such as Apollo Group and Strayer have suffered due to high demands and stricter government regulation.

Source: YCharts

The entire industry, which has been under much scrutiny regarding poor student loan repayment rates, is getting remedial lessons in business economics. But as a consequence, not only have their collective student enrollments declined in the past two years, but so have their stock prices. And investors who bought into these companies are being lectured on the laws of supply and demand. But will they make the grade?

The chart above paints a very clear picture. It suggests struggles in the industry spanning the past couple of years. However, although the chart shows how this industry has traded in tandem, these companies are not all made the same. One such standout is DeVry , which is up nearly 30% so far in 2013.

DeVry, which can be considered one of the "seniors" in this industry, has consistently done its part to supply our economy with capable workers. Not to mention DeVry has one of the best and easy-to-understand businesses in this entire category. For this, the company doesn't get enough "credit."

Plus, from the standpoint of DeVry's program offerings, it matters very little in which industry a student might be interested. Whether it's health care, IT or journalism -- there's a program that will meets the needs of any student. Don't mistake DeVry's well-diversified offerings for a lack of focus.

What's more, with one of the best job placement rates in the industry along with a pristine balance sheet, it's hard to ignore the advantages that this company has over its rivals. And unlike Apollo's University of Phoenix program, which is the leader in enrollments by a meaningful margin, DeVry has been able to grow consistently without cutting corners.


Despite DeVry's strong fundamentals, which includes zero debt, while also being one of the best in the sector in year-over-year revenue performance, there is persistent negativity among those who cover the sector and insist on painting all of the companies with the same brush.