2009 | 2010 | ||||||
Price: | 186.33 | EPS | $5.67 | $6.99 | |||
Shares Out. (in M): | 14 | P/E | 32.8x | 26.7x | |||
Market Cap (in $M): | 2,635 | P/FCF | 39.5x | 33.5x | |||
Net Debt (in $M): | -96 | EBIT | 127 | 161 | |||
TEV (in $M): | 2,540 | TEV/EBIT | 20.0x | 15.8x | |||
Borrow Cost: | NA |
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I believe Strayer Education Inc. (STRA), a for-profit education company, is a compelling short at current price levels with upside of over 50% and a reward/risk of around 3/1.
Short Thesis
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||
Revenues | 396.3 | 318.0 | 263.6 | 220.5 | 183.2 | 147.0 | 116.7 | 92.9 | 78.2 | |
% change YoY | 24.6% | 20.6% | 19.6% | 20.4% | 24.6% | 26.0% | 25.7% | 18.7% | 12.1% | |
Tuition receivable, net | 131.5 | 100.7 | 80.8 | 55.9 | 41.7 | 36.0 | 25.8 | 19.0 | 15.3 | |
% change YoY | 30.6% | 24.6% | 44.4% | 34.2% | 15.8% | 39.7% | 35.5% | 24.6% | 1.8% | |
as a % of revenues | 33.2% | 31.7% | 30.6% | 25.4% | 22.7% | 24.5% | 22.1% | 20.5% | 19.5% |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||
Tuition receivable, net | 131.5 | 100.7 | 80.8 | 55.9 | 41.7 | 36.0 | 25.8 | 19.0 | 15.3 | |
Unearned Tuition | 114.9 | 91.5 | 73.9 | 55.8 | 42.1 | 39.1 | 29.9 | 23.2 | 18.0 | |
Tutition Rec, net/Unearned Tuition | 1.1 | 1.1 | 1.1 | 1.0 | 1.0 | 0.9 | 0.9 | 0.8 | 0.8 |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||
EPS | $ 5.67 | $ 4.47 | $ 3.61 | $ 3.26 | $ 2.74 | $ 2.15 | $ 1.81 | $ 1.55 | $ 1.41 | |
Adjusted (Cash) EPS | $ 4.72 | $ 4.30 | $ 3.26 | $ 3.29 | $ 3.50 | $ 3.02 | $ 2.02 | $ 1.71 | $ 1.61 | |
Adj. (Cash) EPS/EPS | 83.2% | 96.1% | 90.4% | 100.9% | 127.9% | 140.8% | 111.7% | 110.7% | 114.9% |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||
Allowances for doubtful accounts | 4.8 | 3.2 | 3.0 | 1.9 | 1.3 | 0.8 | 0.6 | 0.5 | 0.5 | |
as a % of tuition receivable gross | 3.5% | 3.1% | 3.6% | 3.3% | 3.0% | 2.1% | 2.4% | 2.3% | 3.1% | |
Addition to allowance charged to expenses | 12.7 | 10.5 | 7.8 | 5.5 | 4.2 | 2.7 | 1.8 | 1.6 | 2.1 | |
as a % of revenues | 3.2% | 3.3% | 2.9% | 2.5% | 2.3% | 1.8% | 1.5% | 1.7% | 2.7% |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||
Cost/course (undergrad part-time) | $ 1,510 | $ 1,430 | $ 1,355 | $ 1,285 | $ 1,215 | $ 1,150 | $ 1,094 | $ 1,040 | $ 990 | |
% change YoY | 5.6% | 5.5% | 5.4% | 5.8% | 5.7% | 5.1% | 5.2% | 5.0% | 4.8% | |
Title IV Funds as a % of Revenue | 72% | 72% | 71% | 72% | 71% | 67% | 63% | 58% | 51% | |
Debt Incurred by Avg. Enrollee | $ 6,016 | $ 5,799 | $ 5,410 | $ 5,224 | $ 4,929 | $ 4,408 | $ 3,964 | $ 3,479 | $ 2,874 | |
% change YoY | 3.7% | 7.2% | 3.6% | 6.0% | 11.8% | 11.2% | 13.9% | 21.1% | 14.4% |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 | 1997 | ||
Part-time (<3 courses per quarter) | 82% | 79% | 78% | 77% | 76% | 75% | 76% | 74% | 73% | 72% | 71% | 65% | |
Avg. Quarter Course Credits per Student | 8.2 | 8.2 | 8.3 | 8.1 | 8.6 | 8.7 | 8.6 | 8.8 | 8.8 | 8.9 | 9.0 | 9.0 |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||
Pure online student participation | 27,300 | 21,400 | 18,000 | 15,000 | 11,669 | 8,550 | 5,401 | 3,222 | 495 | |
as a % of enrollment | 61.3% | 59.3% | 57.4% | 54.9% | 49.6% | 42.5% | 32.7% | 23.0% | 4.1% | |
Avg. On Campus Student Enrollment | 288 | 288 | 318 | 367 | 416 | 464 | 557 | 696 | 859 |
Total Tuition (full-time student) | Avg. Non-profit | |||
Strayer | Online School | Difference | ||
Bachelor's Degree (54% of students) | $ 60,200 | $ 40,200 | $ 20,000 | |
Master's Degree (27% of students) | $ 24,480 | $ 15,480 | $ 9,000 | |
Associate's Degree (11% of students) | $ 30,100 | $ 18,750 | $ 11,350 |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | ||
Bachelor's Degree (% of students) | 54% | 55% | 55% | 56% | 58% | 61% | 62% | 62% | |
# of Bachelor's Degree Students | 24,273 | 19,909 | 17,172 | 15,423 | 13,684 | 12,203 | 10,174 | 8,686 | |
% change YoY | 21.9% | 15.9% | 11.3% | 12.7% | 12.1% | 19.9% | 17.1% | - | |
Per Campus | 405 | 390 | 409 | 460 | 480 | 488 | 509 | 560 | |
Master's Degree (% of students) | 27% | 28% | 26% | 25% | 23% | 20% | 18% | 16% | |
# of Master's Degree Students | 12,169 | 10,101 | 8,310 | 6,833 | 5,386 | 4,107 | 3,034 | 2,241 | |
% change YoY | 20.5% | 21.6% | 21.6% | 26.9% | 31.1% | 35.4% | 35.4% | - | |
Per Campus | 203 | 198 | 198 | 204 | 189 | 164 | 152 | 145 | |
Associate Degree (% of students) | 11% | 11% | 11% | 12% | 12% | 13% | 12% | 11% | |
# of Associate's Degree Students | 4,726 | 3,868 | 3,593 | 3,187 | 2,817 | 2,541 | 2,064 | 1,541 | |
% change YoY | 22.2% | 7.7% | 12.7% | 13.1% | 10.9% | 23.1% | 33.9% | - | |
Per Campus | 79 | 76 | 86 | 95 | 99 | 102 | 103 | 99 | |
Non-degree Programs (% of students) | 8% | 6% | 7% | 7% | 7% | 6% | 8% | 11% | |
# of Non-Degree Students | 3,396 | 2,204 | 2,297 | 1,862 | 1,652 | 1,287 | 1,260 | 1,541 | |
% change YoY | 54.1% | -4.0% | 23.4% | 12.7% | 28.4% | 2.1% | -18.2% | - | |
Per Campus | 57 | 43 | 55 | 56 | 58 | 51 | 63 | 99 |
Comparative Business Analysis (2008 vs. 1997) Highlights How STRA Has Grown:
2008 | 1997 | Growth | ||
Campuses (at year end) | 65 | 9 | 622% | |
Students enrolled (by fall term) | 44,564 | 9,419 | 373% | |
Faculty members (total) | 2,407 | 554 | 334% | |
Instruction & education support | 130.8 | 19.7 | 563% | |
Selling & promotion | 76.2 | 5.5 | 1291% | |
Pricing (part-time bachelor's degree) | $ 1,585 | $ 855 | 85% | |
Tuition receivable, net | 131.5 | 10.1 | 1206% | |
Unearned tuition | 114.9 | 11.8 | 875% | |
Allowances for doubtful accounts | 4.8 | 0.2 | 1977% | |
Add. to allowance charged to expenses | 12.7 | 1.4 | 821% | |
# of credits taken by avg. student | 8.2 | 9.0 | -9% | |
Title IV Funds as a % of Revenue | 72% | 50% | 44% | |
Part-time as a % of student body | 82% | 65% | 26% | |
Revenues | 396.3 | 53.1 | 646% | |
Operating margin | 32.0% | 38.9% | -18% | |
EPS | $ 5.67 | $ 0.93 | 509% |
Unusual Promotions/Discounting: For the first time STRA is giving students a $300 books vouchers and waiving the $50 application fee if students enrolled by April 13. Per the average student taking 8.2 credit hours per quarter, this would equate to about a 10% discount for that quarter.
Supporting Details to Short Thesis
Share Statistics
Revenue and EPS growth slows due to the aforementioned issues and thus misses EPS estimates over the next 1-2 years.
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