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Climbing Back

Stock (Symbol) Stock Price

Bridgepoint Education (BPI)

$19

Data is as of Expected to Report Sector

December 30, 2010

Feb 28

Food & Necessities

Sharek’s Take
David SharekBridgepoint is coming back after getting beat-down during the Summer of 2010. The Obama administration is cracking down on for-profit schools that don’t provide a bang-for-the-buck to students. The Department of Education has put tests on the for-profit schools — tests to check to see if not only interest on student loans is being paid back, but principal as well. The thought is if people are really furthering their education in a meaningful way then that should make them enough money to pay the student loans back. Bridgepoint is killing it as far as student paybacks are concerned, so if this school can survive the onslaught, the stock could be a big winner over the long-term. In the short-term, we will have to deal with extreme volatility. 
One-Year Chart
BPI’s one-year chart shows a move from $15 to $27 (up 50%) to $13 (down 50%) and now the stock is up to $19 (up 50%). I ballparked these figures so you’d understand the sways this stock makes. There’s a lot of short-interest in the stock (people betting against it) so this rally could be because of people closing their short positions (people deciding to not longer bet against it).
 
With a P/E of only 8 and an estimated Long Term Growth Rate of 20% theres substantial upside for long-term investors. If BPI was to make $2.50 in 2011 and earn a 20 P/E that would mean the stock would go from $20 t0 $50. I doubt that would happen, but the math works out that way, doesn’t it?
Earnings Table
Profit growth was a solid 61% last quarter, and revenue popped 50%. BPI has the numbers to be a superstar stock, it just doesn’t have the sector for it.BPI whipped earings estimates — which was a super surprise as these estimates had been lowered the prior two quarters.Annual Profit Estimates just increased — I thought estimates would fall with the heat coming down on the for-profit educations. This is a very good sign but there’s still uncertainty so we can’t invest too much into this event.
 
Looking ahead to the next four quarters, growth could should be poor next quarter (but this has been known for more than 6 months). After that profits are expected to grow in the around 20% -35%.
Fair Value
Bridgepoint Education has great potential — but there’s risk to go with that reward. In my heart I do think BPI can go from $19 to $30 in 2011. All I’m asking for is 12 times earnings.
Ten-Year Chart
The numbers look great in BPI’s ten-year chart. The company went public in April 2009and the stock looked like it was going to go on a tear in the Spring of 2010. Then the bottom fell out of the education sector.
 
This stock has the numbers behind it to become a superstar one day, but you can’t put a lot of money behind it because of the political uncertainty for-profit educators have.
Power Ranking Bottom Line
Growth Portfolio

16 of 18

I’m warming up to Bridgepoint again. The stock has turned up! Yeah! But the move higher might have been due to short covering so I have to leave BPI at the bottom of my Power Rankings. BPI is the 16th best stock in the 18 stock Growth Portfolio Power Rankings. 
 
I have stocks I like a lot better than BPI so this is not a stock for Aggressive Growth Portfolio, but investors looking for huge upside could take a chance and roll the dice with this stock.
Aggressive Growth Portfolio

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