Apollo Group (APOL) trades at one of the cheapest valuations in the for-profit education sector after starts declined, but the company is taking steps to improve and increase its student base, all while maintaining a healthy balance sheet, says Jeffrey M. Silber, Managing Director and Senior Analyst at BMO Capital Markets Corp.
“For our contrarian investors, we’ve also been recommending Apollo Group, the largest company in the space with their flagship University of Phoenix. The call so far has not been a good one — we looked like a genius early on when trends started to move in the right direction, but they’ve taken a step back. To the company’s credit, they’re focusing on improving the quality of their student base as opposed to just bringing students in,” Silber said.
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Silber says APOL can appeal to deep value investors. The company’s financial metrics are currently solid, and the company is expanding its offerings to value-conscious students.
“So starts have been declining, though we believe we’ve seen the worst of the annual declines. They are also rolling out a low-priced option through their Western International University brand, which should help attract the price-conscious student. The stock is among the cheapest in the group on virtually every metric, and the company generates cash and has a solid balance sheet. A good pick for your deep value investors,” Silber said.
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