Bullish on Online Education

Positive outlook for the U.S. Online Education sector

The outlook for the post-secondary education industry, especially the online segment, is positive. This industry is comprised of traditional public and private traditional colleges and universities, as well as a number of for-profit institutions offering online programs, such as American Public Education (APEI - Analyst Report), Strayer Education (STRA - Analyst Report) and Devry Inc. (DV - Analyst Report). Most of these colleges and universities target working adults in addition to traditional 18- to 24-year-old students.

The U.S. market for post-secondary education is large, growing and highly fragmented. The U.S. Bureau of Labor Statistics reported that approximately 61 million working adults in the United States do not have more than high school education and approximately 32 million adults have some college experience but no degree. In addition, adults represent 39% of total post-secondary education enrollment.

Adults continue to represent a large and growing segment of the post-secondary education market as they seek additional education to secure better jobs or to remain competitive in their current careers. The revenue growth rate in fully-online education has exceeded the revenue growth rate in the for-profit segment of the post-secondary market. The higher growth rate for fully-online education is largely attributable to the flexibility and convenience of its format.

In line with the positive outlook, Devry, Strayer and American Public all posted double-digit increases in profits. In addition, DV has also completed a strategic acquisition of a private post secondary education provider in Brazil in order to expand internationally. Moreover, revenues of APEI have grown at 43% compound annual growth rate (CAGR) and those of STRA have grown at a 21.0% CAGR.