The high unemployment rate has actually benefited one industry– private-sector education. For-profit education has seen an increase in enrollments across the board and Chicago-based DeVry Inc. is no exception. It has seen a boost in enrollment numbers that has generated extra cash to continue to invest in the company, making it appealing to investors.
It’s no wonder that in a survey of 24 analysts by Bloomberg LP, 15 recommend buying and nine recommend holding DeVry stock.
“Throughout the recession schools like Strayer, Apollo Group’s University of Phoenix, and DeVry have reported increasing enrollment, and profit, as students sought to sharpen their skill set,” Morningstar Inc. markets editor Jeremy Glaser said in a note. “Better loan terms could feasibly accelerate this growth.”
DeVry’s profits increased 69 percent to $72.5 million in its second quarter 2009 ended Dec. 31 from the same quarter a year ago. Its earnings per diluted share also increased 69 percent in the second quarter to $1, which is the first time it hit the dollar mark. If this does not convince you of the company’s health, take a look at the company’s cash flow.
“Cash and marketable securities balance: up. Cash flow from operations: up,” said Rick Gunst, Devry’s chief financial officer, in a conference call. “These strong cash results enable us to decrease outstanding debt… and also invest back in the business.”
The private education company’s net cash provided by operating activities is up 93 percent to $267.3 million for the six month period ended Dec. 31 from $138.8 million in the year ago period.
“As of Dec. 31, 2009, cash, marketable securities and investment balances totaled $334.2 million and outstanding borrowings were $44.7 million,” the company stated in a press release.
“We have generated a lot of cash based on increasing enrollments,” said Joan Bates, DeVry’s director of investor relations. “It has gone up because of investments into new programs.”
There is also speculation that enrollment at schools has gone up due to the recession as the unemployed have turned to increase their skill set.
“We’ll continue to keep sustainable growth even when the recession is over,” said Daniel Hamburger, DeVry’s CEO, in a conference call, mentioning that the company kept its growth rate during the recovery of the recession in the 1990s.
Ariel Sokol, an analyst at Wedbush Securities Inc., said that DeVry is the “best situated mid-cap education company out there” for investors looking to get into the education sector.
“DeVry has really benefited from investments they’ve made in the past such as their academic counseling program,” Sokol said.
DeVry plans to continue investing and expanding its business.
Its capital expenditures increased 143 percent the first half of fiscal year 2010 compared with the year-ago period, to $61.6 million in investments from $25.2 million.
Sokol estimates a 30 percent growth in capital expenditures from 2009 to 2010 and expects DeVry to invest as much as $100 million in the upcoming year.
“First and foremost we are reinvesting into educational quality,” Bates explained. “We also are putting in a new student technology system that will cost $65 million over the next three years.”
She said that the first chunk of that spending started during the second quarter. She also mentioned that the company is expanding its locations for its schools, DeVry University and Chamberlain College of Nursing.
The company expects to grow 20 percent in the upcoming year.
“What we are demonstrating is that investing in quality pays off,” Hamburger stated. “We are not going to be shy making investments.”