For-profit College Under Attack - Apollo Group Inc

The US based for-profit colleges have been under attack by both the investors and the government due to these colleges questionable student recruiting practices and low graduation rate.  The U.S. Government Accountability Office(GAO) reported on August 4, 2010 that the undercover testing at 15 for-profit colleges found that 4 of the colleges encouraged fraudulent practices and all 15 made deceptive or questionable statements.  The continues governemnt probes into the for-profit colleges scared away the investors and drove down share prices of the entire group.  However as the wise investors alway say when many are fleeing it is probably the best time to get in.  So this may probably be a good time to take a close look at these used-to-be high flying stocks.

The Univeristy of Phoenix owned by Apollo Group Inc. (Nasdaq:APOL) is probably the most famous for-profit colleges among all as it has enrollment of 420,700 undergraduate students and 78,000 graduate students, the second largest of United States.  Beside Universisty of Phonenix, Apollo Group also owns 3 other private colleges.  The private education provider earned annual revenue of close to $5 billion in 2010, almost doubled its annual revenue of $2.7 billion in 2007.  The net income is also pretty decent at $553 million 2010, slightly under the $598 million it earned in 2009 but highter thant the $408 million earned in 2007.

Shares of Apollo are currently trading at $38.79 with P/E ratio of 10.51 and market cap of 5.73 billion.  The price is a 56% discount compared to the $90 per share price tag earlier in 2009.  The stock price has been on a downtrend for the past two years and the long term trend still looks negative with 200 day moving average keeps heading downward.  However the recent recovery brought the stock back above 50 day moving average and could bring the stock back to positive trend as KD is now heading up.  So many this is finally the time for the investors to get back in.