Lincoln Educational Services Corp.

Lincoln Educational Services Corp. (LINC - Snapshot Report) recently pulled back from its 52-week and all-time high in spite of reporting awesome Q1 results that included a 37.50% earnings surprise. Although some short-term weakness has crept into shares, the long-term trend is still bullish, supported by rising estimates and a compelling valuation.

First-Quarter Results

Lincoln flexed some muscle on May 5 with strong Q1 results that easily beat the Street. Revenue was up 29% from last year to $153 million. Earnings also came in strong at 55 cents, 38% ahead of the Zacks Consensus Estimate. Lincoln has been on a bit of a roll for the last year, with an average earnings surprise of 31% over the last four quarters.

The company gained in a number of key categories over the quarter, with operating income up 137% as its operating margin expanded 760 basis points. Lincoln also continues to see strong enrollment trends, with student starts up 19% and the average student population growing 25%.

Debt Defaults Declining

With plenty of uncertainty in the debt markets and student borrowers struggling to repay loans in a weak employment environment, Lincoln actually showed improvements in its credit losses, declining to 5.6% of revenue from 6.1% last year.

Strong Balance Sheet

The company's balance sheet improved as well, with its total debt load decreasing $20 million to $37 million against $34 million in cash and equivalents.

Estimates

With some upward momentum on display with the better than expected Q1 results hitting the Street, estimates have ticked higher. In just the last week the current-year estimate is up 19 cents to $2.58 while the next year has added 7 cents to $2.81, a solid 9% growth projection.

Valuation

Not only is Lincoln showing nice signs of growth, its share price also has value, trading with a forward P/E multiple of 9X, a solid discount to its peer groups 12X. Its P/B of 2.83X also trumps its peers at 3.86X.

The Chart

Shares of LINC recently dipped lower from the all-time high just above $28 after trending higher for most of the last 14 months. The stochastic indicator below the chart is signaling that shares are trading in oversold territory. Look for support at the long-term trend line at $21 on any more weakness, take a look below.

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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service.

Read the full analyst report on LINC