DeVry Thrives as Unemployment Spreads
The unemployment rate continues to climb as the credit crisis has the global economy in a vice. This week’s jobless claims rose by about 542,000, which equates to an unemployment rate of 6.5%,
the highest in 16 years. Today, President Bush signed into law a package that will extend unemployment benefits for many struggling job seekers. This is the seventh time that unemployment benefits have been temporarily extended in the last 50 years. Essentially, those job seekers whose benefits (generally about $300 per week) were about to expire will get a reprieve as the prospects for job growth are dim. Not included in these numbers are workers who are being asked (read told) to work fewer hours. The story on unemployment is unlikely to improve for at least a few months, as Goldman Sachs (GS) released dire predictions for the economy going forward saying the unemployment rate could be as high as 9% by the fourth quarter of 2009.
It may sound crass but even as employers are shedding workers, there are businesses looking for motivated job seekers hoping to improve what they have to offer the public. One of the first industries which comes to mind is educational and vocational training schools, such as DeVry Inc (DV). DeVry University and its affiliates are in the business of training people for new careers in various fields. As the jobless rate continues to rise and stints on unemployment last longer, it is logical to assume that many of the jobless will be inclined to either improve their skills or start a new career altogether.
Over the last six months the broad market has fallen about 44%, but the 19 companies that Ockham Research covers in the Education and Training Services group is only down 19% on a market cap weighted basis. If the first year of the credit crisis is a guide, an extended recession will lead to increased business for DeVry and others in the sector. DeVry’s fiscal first quarter results (period ended September 30th) showed impressive revenue gains of 21.3% and cash earnings increased by a whopping 29.8%. The company reported 17,800 graduate course takers for the September session, which is an increase of 12% from last year. Analysts’ estimates are for continued earnings growth of 24.3% for the full year. These signs of growth led to Forbes.com to make DeVry its Stock of the Week this week (Lookin’ Fly In DeVry).
Investors fearful of an extended recessionary environment might want to look for a stock that could benefit from economic contraction. DeVry is classified as Fairly Valued by our fundamental valuation methodology, but it may be able to provide shelter from the storm, so to speak. Its business has been growing in this environment and is projected to continue to grow; the stock is relatively uncorrelated to the market with a beta of just 0.43, to boot. The stock caught the late week rally to go up near $52. While we are not buyers at current price levels, it might be a good defensive play should it fall back to the mid $40’s.
Ockham Research Staff @ November 21, 2008
[…] skills in the eyes of potential employers. We wrote a blog on this phenomenon in November (DeVry Thrives as Unemployment Spreads) when unemployment hit a 16-year high and the numbers have only gotten worse since. Since […]
[…] their skills in the eyes of potential employers. We wrote a blog on this phenomenon in November (DeVry Thrives as Unemployment Spreads) when unemployment hit a 16-year high and the numbers have only gotten worse since. Since that […]
[…] skills in the eyes of potential employers. We wrote an article on this phenomenon in November (DeVry Thrives as Unemployment Spreads) when unemployment hit a 16-year high and the numbers have only gotten worse […]
[…] skills in the eyes of potential employers. We wrote an article on this phenomenon in November (DeVry Thrives as Unemployment Spreads) when unemployment hit a 16-year high and the numbers have only gotten worse […]
DeVry needs to clean up their act and deliver the high standard education they always advertise but obviously don’t deliver in most of their locations. The majority of their profits goes to advertising to get new enrollment that mislead students only to acquire their state grants .Meanwhile because of DeVry’s financial shortfalls they can barely provide the essential elements needed in their core courses & hired many unqualified instructors who are simply local businessmen & have never have taught in a school environment prior to being hired at DeVry. This seems to be a new wave of American business strategy in education when a for-profit university is simply a business prospect rather than a relevant educational facility. As long as the big executives get their 6 figure salaries and bonuses they couldn’t care less about the quality of service/product they sell. This demonstrates the fall of once honest business practices in the USA and now reveals their lack of integrity without appropriate government regulations.
The admissions personnel spend more time reading their scripts than actually knowing what really goes on at DeVry. But they are simply employees working on how many new students they can enroll for their earned commissions. DeVry has become a lucrative business for the key executives that now run the corporations. Many reputable corporations will not hire from DeVry graduates since they don’t feel students received the essential education needed in today’s high demanding technical fields, etc. Some DeVry recruiters are honest and tell you the truth but most just want the commission they receive for enrolling as many people as they can that walk through their doors. State grants are easily distributed by government agencies and never hear the voices of students left without a reliable education after receiving their degree. DeVry executives all got their real educations at Harvard, Stanford or Princeton and I highly doubt they would send their own children to DeVry. After all it’s just considered their business that provides them with their personal wealth to achieve their goals.