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A big reason for choosing for-profit education stocks is evolving industry prospects on the much-needed regulatory support from the Trump administration. The sector, which peaked in 2010 and bottomed in 2013, is now in an upcycle.
For-profit education stocks took a battering during the Obama era. Apprehensions related to tuition fees, ballooning student loan debt and employment success after graduation gave rise to regulations that resulted in the closure of a number of programs hosting a huge number of students. That said, the business climate is dramatically improving under President Trump for many of the top for-profit education colleges.
Will 2019 Shower Fortunes on For-Profit Colleges?
The administration is set to revise for-profit education industry regulations, as announced by the U.S. Department of Education last year. The department intends to bring about changes to the Borrower Defense to Repayment (BDR) and Gainful Employment (GE) system, introduced during Obama’s reign.
This apart, industry bigwigs are finding innovative ways to compete in an increasingly competitive education landscape and deliver returns to shareholders. In order to boost profitability, school companies have resorted to aggressive cost-cutting through significant layoffs and campus closings and consolidations. This year’s Strayer Education, Inc. and Capella Education Company merger deal to create Strategic Education, Inc. or SEI, a national leader in education innovation, is a classic example of the industry’s evolving nature. Earlier this month, Adtalem Global Education Inc. (ATGE - Free Report) completed the transfer of ownership of DeVry University as well as Keller Graduate School of Management to Cogswell Education LLC. The company also announced the completion of the transfer of ownership of Carrington College to San Joaquin Valley College.
Importantly, the industry has been observing some noteworthy trends that are expected to deliver productive results in the years to come. The companies are increasingly switching to online education programs, using more of technology in education, increasing investment in overall education, regularly introducing programs and specializations to boost student outcome. They are also partnering with different organizations to reduce exposure to Title IV funding and improve academic quality and retain students. Many for-profit education companies have been investing in non-degree programs and designing programs that are specifically aimed at meeting the educational needs of working adults in targeted professions. Amid all these transformative modes, sustained low unemployment level and higher disposable income are expected to aid the industry.
Picking the Winning Stocks
With the help of the Zacks Stock Screener, we have handpicked five stocks from the industry based on a good Zacks Rank and other relevant metrics that are reaping the benefits of the current positive scenario and also have the potential to grow further.
Shares of K12 have returned almost 45.6% so far this year, outperforming its industry. In the last 60 days, the Zacks Consensus Estimate for earnings increased 28.8% for the current year and 30.3% for the next. Meanwhile, earnings are expected to grow 11.8% for the current year and 13.2% for the next.
Universal Technical Institute, Inc. (UTI - Free Report) : This Scottsdale, AZ-based technical education provider currently carries a Zacks Rank #2 (Buy). Shares of Universal Technical have returned 40% year to date, outperforming its industry. The company’s earnings are expected to grow 57.6% for the current year and 126.6% for the next.
Bright Horizons Family Solutions Inc. (BFAM - Free Report) : Headquartered in Watertown, MA, Bright Horizons is a leading provider of high-quality child care, early education and other services. Shares of Bright Horizons have returned 15.9% year to date, outperforming its industry. The company’s earnings are expected to grow 17.1% for the current year and 12.6% for the next. Also, the company’s long-term (three-five years) estimated EPS growth rate of 12% seems promising.
Adtalem Global Education Inc. (ATGE - Free Report) : This Chicago, IL-based company is a leading global education provider which currently carries a Zacks Rank #2. Shares of Adtalem have returned more than 13% year to date, outperforming its industry. In the last 60 days, the consensus estimates for earnings inched up 2.8% for fiscal 2019. Its expected EPS growth rate for 3-5 years is 13.3%.
OneSmart International Education Group Limited : Headquartered in Shanghai, the People's Republic of China, this company provides tutoring services for kindergarten and primary, middle, and high schools. In the last 60 days, the consensus estimate for earnings grew 12.5% for the current year and 4.9% for the next.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
Image: Bigstock
5 Top-Ranked Education Stocks to Buy for 2019
A big reason for choosing for-profit education stocks is evolving industry prospects on the much-needed regulatory support from the Trump administration. The sector, which peaked in 2010 and bottomed in 2013, is now in an upcycle.
For-profit education stocks took a battering during the Obama era. Apprehensions related to tuition fees, ballooning student loan debt and employment success after graduation gave rise to regulations that resulted in the closure of a number of programs hosting a huge number of students. That said, the business climate is dramatically improving under President Trump for many of the top for-profit education colleges.
Will 2019 Shower Fortunes on For-Profit Colleges?
The administration is set to revise for-profit education industry regulations, as announced by the U.S. Department of Education last year. The department intends to bring about changes to the Borrower Defense to Repayment (BDR) and Gainful Employment (GE) system, introduced during Obama’s reign.
This apart, industry bigwigs are finding innovative ways to compete in an increasingly competitive education landscape and deliver returns to shareholders. In order to boost profitability, school companies have resorted to aggressive cost-cutting through significant layoffs and campus closings and consolidations. This year’s Strayer Education, Inc. and Capella Education Company merger deal to create Strategic Education, Inc. or SEI, a national leader in education innovation, is a classic example of the industry’s evolving nature. Earlier this month, Adtalem Global Education Inc. (ATGE - Free Report) completed the transfer of ownership of DeVry University as well as Keller Graduate School of Management to Cogswell Education LLC. The company also announced the completion of the transfer of ownership of Carrington College to San Joaquin Valley College.
Importantly, the industry has been observing some noteworthy trends that are expected to deliver productive results in the years to come. The companies are increasingly switching to online education programs, using more of technology in education, increasing investment in overall education, regularly introducing programs and specializations to boost student outcome. They are also partnering with different organizations to reduce exposure to Title IV funding and improve academic quality and retain students. Many for-profit education companies have been investing in non-degree programs and designing programs that are specifically aimed at meeting the educational needs of working adults in targeted professions. Amid all these transformative modes, sustained low unemployment level and higher disposable income are expected to aid the industry.
Picking the Winning Stocks
With the help of the Zacks Stock Screener, we have handpicked five stocks from the industry based on a good Zacks Rank and other relevant metrics that are reaping the benefits of the current positive scenario and also have the potential to grow further.
K12 Inc. (LRN - Free Report) : This Herndon, VA-based technology-based education company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of K12 have returned almost 45.6% so far this year, outperforming its industry. In the last 60 days, the Zacks Consensus Estimate for earnings increased 28.8% for the current year and 30.3% for the next. Meanwhile, earnings are expected to grow 11.8% for the current year and 13.2% for the next.
Universal Technical Institute, Inc. (UTI - Free Report) : This Scottsdale, AZ-based technical education provider currently carries a Zacks Rank #2 (Buy). Shares of Universal Technical have returned 40% year to date, outperforming its industry. The company’s earnings are expected to grow 57.6% for the current year and 126.6% for the next.
Bright Horizons Family Solutions Inc. (BFAM - Free Report) : Headquartered in Watertown, MA, Bright Horizons is a leading provider of high-quality child care, early education and other services. Shares of Bright Horizons have returned 15.9% year to date, outperforming its industry. The company’s earnings are expected to grow 17.1% for the current year and 12.6% for the next. Also, the company’s long-term (three-five years) estimated EPS growth rate of 12% seems promising.
Adtalem Global Education Inc. (ATGE - Free Report) : This Chicago, IL-based company is a leading global education provider which currently carries a Zacks Rank #2. Shares of Adtalem have returned more than 13% year to date, outperforming its industry. In the last 60 days, the consensus estimates for earnings inched up 2.8% for fiscal 2019. Its expected EPS growth rate for 3-5 years is 13.3%.
OneSmart International Education Group Limited : Headquartered in Shanghai, the People's Republic of China, this company provides tutoring services for kindergarten and primary, middle, and high schools. In the last 60 days, the consensus estimate for earnings grew 12.5% for the current year and 4.9% for the next.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>