| Stock (Symbol) |
Stock Price |
Strayer Education (STRA)
|
$160
|
| Data is as of |
Expected to Report |
Sector |
December 14, 2010
|
Feb 11
|
Education
|
| Company Description |
|
Strayer Education, Inc. is a post-secondary education services corporation. The Company offers a range of academic programs through its wholly owned subsidiary Strayer University, Inc. (the University), both in classroom courses and online via the Internet. Strayer University is an institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health care, public administration and criminal justice at 78 physical campuses in Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Washington, D.C. As of December 31, 2009, the Company had more than 54,000 students enrolled in its programs. The Company has also developed a robust online education program.
|
| Sharek’s Take |
 Strayer’s now at $160, 29% higher than its 52-week low but still well off its yearly high of $262. Although the tide has now turned and the shares are now pointing higher, I’m going to use the recent rally to sell shares of STRA in the Growth Portfolio. Here’s why:
- There’s still incredible pressure on for-profit education companies coming from Obama and the Department of Education. This uncertainty has made Education stocks untimely.
- As the one-year chart below shows, STRA has a P/E of 14 and profits are expected to grow around 15% during the next six months. I like profit growth of 20% or more.
- With the economy in growth mode, the Education sector is not in favor. People are not getting laid off anymore, thus the flow of possible students has slowed.
- The list of growth stocks I can purchase is large. This good economy gives me a lot of stocks to consider,many with profit growth well over 20%.
- I own two Education stocks in the Growth Portfolio, and Bridgepoint Education (BPI) is younger and faster growing.
|
| One-Year Chart |
| STRA broke past $150 resistance last week, and is now $160. Although momentum is now here, the stock’s P/E (14) is close to the estimated Long Term Growth Rate (16%) and the Estimates for the next two quarters (15%, 16%) so this stock is not a bargain. |
 |
| Profit Growth |
Earnings Table |
| Profits jumped 42% last quarter as revenue grew 29%, up from 26% last quarter. Could it be I’m selling when I shouldn’t be? Yes. |
 |
| Beat the Street |
| STRA beat by 2 cents last quarter, but estiamtes for future quarters just got slashed, so STRA will have to beat by 33 cents next quarter to make it good. |
| Annual Profit Estimates |
| Annual estimates declined. These estimates could continue to decline with the political uncertainty surrounding the for-profit stocks. Obama hates them, think they are just out to make a buck. |
| Future Quarters |
| Profits look to grow 15% to 22% during the next four quarters and these estimates just declined so I would say 15% growth is optimistic. |
| Fair Value |
| STRA is worth around 15 times earnings now that the sector is under duress. That leaves weak upside potential. STRA used to be worth 25 to 30 times earnings, so the P/E could rise up again, but I doubt it will anytime soon. |
| Year |
Profits |
x |
P/E |
= |
Price |
Upside/Downside |
| Today |
11.03 |
x |
14 |
= |
160 |
|
| 2011 Fair Value |
11.03 |
x |
15 |
= |
165 |
3% |
| 2012 Fair Value |
12.08 |
x |
15 |
= |
181 |
13% |
|
| Ten-Year Chart |
| Strayer has been a very solid investment during the past ten years. Profits show solid growth each year with a stock that’s shown steady growth. I like STRA a lot, but feel there are more high-octane things we can do with out money now that for-profit education is stuck in neutral. |
 |
| Power Ranking |
Bottom Line |
Growth Portfolio
N/A
|
I will sell STRA from the Growth Portfolio today. I love the company but feel the recent rally gives me a good chance to sell. I think Education stocks are better to own when people are getting laid off. |
Aggressive Growth Portfolio
N/A
|
