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04/05/2005 Career Education Corp (CECO)
Our last profiled stock, Electronics Boutique, broke above the 52 week high only a couple of days after we profiled it. It has since been drifting lower on lower volume suggesting it may continue higher when volume comes in. Today we take a look at a stock that appears in our new intrinsic value screen. This is a screen of growth stocks with excellent prospects which are undervalued in terms of intrinsic value. The stock we are looking at is quality educational services provider, Career Education Corp (CECO).
CEC aims to "become the world's leading provider of quality educational
services" and is already close to achieving that goal. CEC is also "the
world’s largest on-campus provider of private, for-profit postsecondary
education" and "has a rapidly-growing presence in online education."
Essentially it has 2 business segments: brick-and-mortar schools, and
the online schools. The former is made up of schools, colleges and
universities in the US, Europe and the Middle East. The latter is made
up of the American InterContinental University Online and Colorado
Technical
University Online, and these deliver educational services through
Internet-based courses
Since the 52 week high of $70.91, CEC has dropped like a stone, mainly due to a Class Action lawsuit by investors and former employees claiming it overstated student results. Additionally, SEC probes into accounting practices and corporate governance materialized. Investors turned away from CEC as a result.
With the stock meandering around $35 ($35.38 at the last close on April 4), CEC is up today on news that the SEC accounting probe has been closed. No comments on the findings of the probe were entered into, however, and the corporate governance probe is still ongoing as is the Class Action lawsuit.
Although these investigations leave a bad taste and always bring with them the specter of even more downside risk, the stock is worth keeping an eye on in case nothing untoward is found or the offences are minor. At the end of the day, it is results that matter, and if a company keeps churning out improved results investors will always come back. CEC has a 1 year forward intrinsic value of $69.72 according to our screen. The PEG is 0.59 which means it is well undervalued in terms of forward earnings growth projections, assuming such estimates remain intact. We will observe how the downtrend from the beginning of this year develops and whether or not CEC0 starts showing signs of breaking out of this downtrend.
Since the 52 week high of $70.91, CEC has dropped like a stone, mainly due to a Class Action lawsuit by investors and former employees claiming it overstated student results. Additionally, SEC probes into accounting practices and corporate governance materialized. Investors turned away from CEC as a result.
With the stock meandering around $35 ($35.38 at the last close on April 4), CEC is up today on news that the SEC accounting probe has been closed. No comments on the findings of the probe were entered into, however, and the corporate governance probe is still ongoing as is the Class Action lawsuit.
Although these investigations leave a bad taste and always bring with them the specter of even more downside risk, the stock is worth keeping an eye on in case nothing untoward is found or the offences are minor. At the end of the day, it is results that matter, and if a company keeps churning out improved results investors will always come back. CEC has a 1 year forward intrinsic value of $69.72 according to our screen. The PEG is 0.59 which means it is well undervalued in terms of forward earnings growth projections, assuming such estimates remain intact. We will observe how the downtrend from the beginning of this year develops and whether or not CEC0 starts showing signs of breaking out of this downtrend.