For-profit College Under Attack - Bridgepoint Education Inc

Shares of most US based for-profit colleges have been suffering for the past 52 weeks due to government probe of 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 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 who are the three top players among the for-profit colleges.  Today lets look at a smaller but rapidly growing player in this group.

Bridgepoint Education Inc. (NYSE:BPI) owns Ashford University and University of the Rockies with enrollment of 77,179 students.  Although its $454 million annual revenue of 2009 is not as big as the other major education providers such as Apollo Group($5 billion) and Corinthian College($1.76 billion), the growth rate is the fastest with 1500% gain in 4 years from $28 million annual revenue in 2006.  And after the company swung into annual income of $3 million in 2007, the net income continue to surge in the next two year to $47 million in 2009, gaining 1400% in just two years. So far for the first three quarters in 2010 Bridgepoint Education have already earned revenue of $519 million and net income of $100 million, far exceeding the annual total in 2009.

Shares of Bridgepoint Education have been almost flat for the past 52 weeks going from $15 of 2010 to $17.5 at the moment, a modest 7% gain despite its strong financial growth.  The stock is traded at a low P/E ratio of 8.76 with market cap of 919 million.  The technical chart shows positive trend as 20 day moving average is on top of 50 day moving average.  However with KD lines pointing downward do expect selling pressure in the mean time.  If the stock is able to hold the 50 day moving average at $16 expect buyers to come back.