Educated investors like the University of Phoenix
Dear Mr. Berko:
I recently hired a University of Phoenix graduate over a University of Florida graduate, because I felt the Phoenix student would give me more bang for my buck in our accounting department. I’m interested in owning shares of this for-profit school, because I think they do a superb job of preparing people for the business world. Please tell me about this company and if you would recommend its stock, which is called the Apollo Group.
E.N., Gainesville, Fla.
Dear E.N.:
Apollo Group Inc. (APOL-$50.19), which owns the University of Phoenix, may not have the panache of a University of Florida, but it gives more students a superb education for much less money, certainly more effectively and in a lot less time than Florida.
The recent brouhaha of student financing aside, APOL is a compelling stock for long-term gains. In fact, our public colleges would do well to follow in its footsteps. For instance: This year, APOL has an enrollment of 478,000 students with a budget of $4.8 billion. The University of Florida has an enrollment of 50,000 students with a budget of $4.9 billion. APOL employs 49,800 teachers and staff with a ratio of nine students for each staff member. Meanwhile, the University of Florida, with more than 900 buildings on a 2,000-plus-acre campus and a staff of l6,000, has a ratio of three students per staff member.
Although the University of Florida continues to raise its rates and beg the state legislators for more money, APOL expects to make an $830 million profit.
APOL is the Wal-Mart of the education industry. The people in charge know how to deliver a good education without coddling students, without frivolous fluff, without the useless feel-good curriculum, without the lavish student unions, dormitories, sports complexes, private health care, a police force and elaborate administration buildings that look like Taj Mahals. Phoenix University should be every state’s blueprint for a public education system.
In 2007, 2008 and part of 2009, APOL traded as high as the $90s. Its success and perception as a solid venue for learning have enabled revenues to grow more than eightfold in the past 10 years, from $600 million a decade ago to nearly $5 billion this year. In that time frame, earnings have grown l,300 percent and management has never asked the state or federal government to pay for teaching salaries, cover maintenance, build sports complexes, provide housing or pay administration salaries.
I realize there’s a bias against an APOL degree compared with one from a state university, but that’s beginning to disappear. Some businessmen with whom I talk prefer to hire a University of Phoenix graduate rather than a state college product, because the APOL grad is often more mature, better focused, wants to improve job skills, is more career-oriented and has a better grip on reality than the state college student who needs six years to graduate and is pampered by the system on weekdays so he or she can binge on weekends.
APOL’s revenues and earnings should continue to outperform the economy. Value Line thinks it can be a $120 issue in several years.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. ©2010 Creators.com
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