For-profit College Under Attack - Career Education Corp

Shares of many US based for-profit colleges have been suffering for a while due to government probe of questionable student recruiting practices and low graduation rate.  The government probes into the for-profit colleges scared away the investors and drove down share prices of the entire group.  However this may be exactly the right time to invest in these stocks as the wise investors alway do.  So far we've already looked at Apollo Group , DeVry and Corinthian College.  Today lets look at another major player in the for-profit colleges.

Career Educaiton Corp(Nasdaq:CECO) is another major education provider running over eighty for-profit college campuses with approximately 90,000 students throughout US, Canada, France and UK.  The schools that CECO operates includes California Culinary Academy, Brown College, the Harrington College of Design, the Brooks Institute of Photography, Brooks College, the Katharine Gibbs Schools, American InterContinental University, Colorado Technical University, Sanford-Brown Institutes and Sanford-Brown Colleges, Collins College, Lehigh Valley College, Briarcliffe College, International Academy of Design and Technology and Western School of Health and Business Careers.  


The company's annual revenue of $1.76 billion in 2009 is comparable to Devry and Corinthian which make $1.7 billion and $1.9 billion respectively.  However instead of the rapid growth like the other two for-profit college operators, Career Education Corp's annual revenue actually dropped by $40 million from 2006 to 2009 even though annual income rose 76% during the same period from $46 million to $81 million.  Nevertheless the school operator should have a record breaking year in 2010 as its net income for the first three quarters of 2010 has already reached $145 million, an 80% gain in a year already.  The annual revenue is also on track to exceed the previous year's figure. 

Shares of CECO have not been doing well for the past 8 months going from $35.8 in April of 2010 to $21.14 recently, losing 40%.    However the technical chart shows very bullish signal as 20 day moving average has just crossed above 50 day moving average recently forming Golden Cross.  The stock should continue to go up at least till the 200 day moving average line of $24.