Many have looked for the for-profit education industry to keep providing solid growth even in a recession. For-profit education stocks have customarily behaved somewhat counter-cyclically in the past, so some are betting that they'll continue doing well in the current environment.

But are any of their stocks worth buying at current price levels?

Company

Expected 5-Year EPS

Trailing P/E

Market cap (millions)

Apollo Group (Nasdaq: APOL)

17%

14.6

10,300

ITT Educational Services (NYSE: ESI)

17%

15.2

3,640

DeVry (NYSE: DV)

23%

22.4

3,380

Strayer Education (Nasdaq: STRA)

21%

35.7

3,050

Career Education (Nasdaq: CECO)

13%

30.5

2,050

Capella Education (Nasdaq: CPLA)

26%

34.9

1,080

Universal Technical Institute (NYSE: UTI)

20%

185.2

358

Source: Yahoo! Finance. Data as of July 28, 2009.
EPS = earnings per share. P/E = price-to-earnings ratio.

With unemployment on the rise, it's natural for people to seek out additional training and qualifications to distinguish themselves amid a sea of laid-off workers, and it follows that they'll send for-profit schools' revenues skyrocketing.

This is not your father's university
Compare these corporations to traditional universities, and you'll see why some of them are profit-making machines. Especially for those that offer online programs, once you pay the fixed costs of creating a curriculum and the technology to deliver it, every additional enrollment generates more profit.

Moreover, working adult students don't require big capital expenditures in old college standbys like dormitories, athletic programs, full-service cafeterias, and clinics. For-profit education companies can instead focus on building extremely economically efficient businesses.

Hey, you! Get off of my grounds.
In capitalizing on those trends, companies with online campuses have performed better than those that are locked into bricks-and-mortar classrooms. Look at the operating margins of these companies that caught on early and have been pushing online enrollments:

Company

Operating
Profit Margin
Most Recent Quarter

Operating
Profit Margin
2008

Operating
Profit Margin
2007

Operating
Profit Margin
2006

Strayer

38%

32%

31%

30%

ITT

35%

32%

28%

24%

Apollo

32%

24%

23%

26%

Capella

18%

15%

13% Continued...