Rising earnings estimates on the back of strong first-quarter fiscal 2013 results, which included a 58.1% earnings surprise, helped this diversified education provider DeVry, Inc. ( DV - Analyst Report ) achieve a Zacks #1 Rank (Strong Buy) on December 29. This stock turned around from past few quarterly results and has bright prospects going forward.

The stock is currently trading at 80.9% discount to its 52-week high of $42.37. With a discounted price and long-term expected earnings growth rate of 9.8%, this stock offers an attractive investment opportunity.

The Rank Drivers

Combination of a solid cost-control strategy, improving new student enrollments, brand building and growth investments and an upbeat outlook are the rank drivers for this stock.

On October 25, DeVry reported first-quarter fiscal 2013 (ended September 30) earnings of 49 cents per share, largely beating the Zacks Consensus Estimate of 31 cents by 58%. Higher-than-expected cost savings and improving new student enrollments at several institutions drove the earnings beat.

Continued progress on its performance improvement plan to align costs, regain enrollment growth and make growth investments helped the company to turnaround from the past few weak quarterly results.

Revenue of $482.7 million also beat the Zacks Consensus Estimate of $481 million primarily driven by better-than-expected new enrollment growth at the medical institutions. Though post-secondary enrollments across all its programs declined year over year, the company witnessed solid new enrollment growth in healthcare institutions like Chamberlain College of Nursing and Carrington Colleges. The sequential improvement in new enrollments at DeVry University is also an encouraging sign.

Operating costs declined both year over year and sequentially owing to DeVry’s cost saving initiatives. Though near-term results are expected to remain choppy due to continued enrollment declines at the flagship DeVry University, we believe that the company has a solid plan to reduce costs and drive attractive earnings growth in the 2014-2016 period.

Earnings Estimates Rising

Over the last 60 days, the Zacks Consensus Estimate for fiscal 2013 has increased 2.4% to $2.16 per share, as all the 14 estimates were revised higher. The Zacks Consensus Estimate for fiscal 2014 has risen 0.8% to $2.45 per share, with 12 out of 14 estimates going up over the same time frame, reflecting a year-over-year increase of 13.6%.

Valuation

DeVry looks expensive at current levels. DeVry currently trades at a forward price-to-earnings (P/E) of 11.01, representing a premium of 42.2% to the peer group average of 7.74. On a price-to-sales basis too, the stock is trading at 0.73, a premium of 73.8% to the peer group average of 0.42.

However, the shares trade at a discount of 9.8% to the peer group on a price-to-book value basis. Overall, the premium valuation looks justified given its strong fundamentals.

About the Company

DeVry provides secondary and post-secondary education primarily in the U.S. and also has operations in Canada, some Caribbean countries, Brazil, Europe, the Middle East and the Pacific Rim. The company’s programs focus mainly in the fields of business, healthcare and technology.

The company also serves accounting and finance professionals. The market cap of the company is $1.5 billion. DeVry, a peer of Apollo Group ( APOL - Analyst Report ) , carries a Zacks #3 Rank (short term Hold rating).