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Here's Why You Should Retain American Public (APEI) Stock Now
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American Public Education, Inc. (APEI - Free Report) has been benefiting from improved enrollment trends and solid contributions from the American Public University System (APUS) and Hondros College of Nursing segment (HCN) segments. Also, focus on cost-saving initiatives and affordable tuition bodes well.
However, low contributions from the Rasmussen University (RU) segment, and high costs are major concerns.
The U.S. healthcare sector is currently struggling with a significant talent shortage, posing a threat to care quality and exacerbating health disparities in communities nationwide. This shortage has been worsened by the pressures faced by the nursing community during the pandemic, leading to increased departures and early retirements from the field.
With 22 campuses dedicated to educate new nurses, ATGE believes its RU segment is well-positioned to address this persistent demand and train more aspiring nurses to enter the workforce. ATGE remains optimistic about its role in the nursing and allied health ecosystem and is committed to its mission for students, faculty, and staff.
Let’s discuss the factors substantiating its Zacks Rank #3 (Hold).
Growth Drivers
Strong APUS & HCN Enrollment: American Public has been registering an impressive enrollment growth at APUS and HCN. Net course registrations at APUS increased 5.7% year over year in second-quarter 2023. The APUS segment has been benefiting from the increase in military-related registrations from students utilizing TA and increased tuition for nonmilitary students.
Enrollment momentum continued for the 14th consecutive quarter at HCN, achieving growth of 22% year over year in the second quarter. HCN benefited from its expansion into Michigan, witnessing over 100 new student enrollments in the summer of 2023. This brings the total enrolled student count to more than 275 by the third quarter. The growth is primarily driven by grassroots efforts, resulting in lower marketing expenses during the first three quarters of 2023.
Despite higher costs, inflationary pressure and tepid RU enrollment, APUS and HCN’s revenue increased by 5.2% and 24.2% year over year in the second quarter, respectively. The upside was backed by successful marketing efforts and the execution of enrollment strategies. The company expects the segments revenue growth and year-over-year margin expansion to continue through the end of the year.
Cost Control Measures: APEI has undertaken several initiatives to address increasing cost pressure. In August 2023, the company initiated measures to optimize the cost structure of both Rasmussen and the entire APEI enterprise, aiming to better align with the current revenue profile. These efforts are projected to reduce annual operating expenses by $12.4 million, including $2.8 million in pre-tax cash expenses for employee severance costs in third-quarter 2023. Additionally, starting in the third quarter, APEI plans to reduce certain nonlabor costs by approximately $800,000 to $1.1 million annually.
The company's Board of Directors is implementing measures to decrease overall governance structure costs, as part of these cost-saving initiatives. These actions includes, maintaining the APEI Board compensation structure for the third consecutive year in 2023 and reducing the size of the Board.
Affordable Tuition to Drive Growth: The skill gap and increased cost of higher education have been threatening the nation. Workers are forced to take expensive courses to improve their skills. American Public continued to be a leader in affordability and value. By creating affordable pathways to support employment and career advancement, it aims to help learners of all backgrounds maximize their higher education return on investment.
Although in April 2023, the company implemented tuition and fee increases for its nonmilitary and veteran students, it remains lower than the average in-state cost at public universities. This signifies the company's commitment to providing exceptional value and a favorable return on higher education investment for students.
Image Source: Zacks Investment Research
Concerns
In the past three months, shares of APEI have declined 1.7% against the industry’s 16.4% rise. Over the last few quarters, American Public has been experiencing increased costs, ultimately denting profitability. Total costs and expenses (excluding impairment charges) increased by 1.7% year over year in second-quarter 2023. Adjusted EBITDA declined 39.6% year over year. This upside was attributed to the increased employee compensation costs, bad debt expenses, building rent and maintenance costs, along with technology costs, partially offset by a decrease in advertising costs.
Also, the tepid performance of its RU segment is affecting the company’s growth prospects. During second-quarter 2023, The RU segment’s revenue declined 18.7% to $52 million from a year ago. RU’s total student enrollment fell 12.6% from the prior-year period’s levels to 13,900 due to a 21.9% decline in nursing and a 2.6% decline in non-nursing enrollment.
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 28.5%, on average. The stock has surged 128% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) suggests growth of 54.5% and 180.3%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) currently flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 147.9%, on average. The stock has gained 50% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS suggests increases of 104.9% and 537.9%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) carries a Zacks Rank #2 (Buy) at present. It has a trailing four-quarter earnings surprise of 42.6%, on average. The stock has gained 30.8% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates growth of 44.5% and 117.9%, respectively, from the year-ago period’s levels.
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Here's Why You Should Retain American Public (APEI) Stock Now
American Public Education, Inc. (APEI - Free Report) has been benefiting from improved enrollment trends and solid contributions from the American Public University System (APUS) and Hondros College of Nursing segment (HCN) segments. Also, focus on cost-saving initiatives and affordable tuition bodes well.
However, low contributions from the Rasmussen University (RU) segment, and high costs are major concerns.
The U.S. healthcare sector is currently struggling with a significant talent shortage, posing a threat to care quality and exacerbating health disparities in communities nationwide. This shortage has been worsened by the pressures faced by the nursing community during the pandemic, leading to increased departures and early retirements from the field.
With 22 campuses dedicated to educate new nurses, ATGE believes its RU segment is well-positioned to address this persistent demand and train more aspiring nurses to enter the workforce. ATGE remains optimistic about its role in the nursing and allied health ecosystem and is committed to its mission for students, faculty, and staff.
Let’s discuss the factors substantiating its Zacks Rank #3 (Hold).
Growth Drivers
Strong APUS & HCN Enrollment: American Public has been registering an impressive enrollment growth at APUS and HCN. Net course registrations at APUS increased 5.7% year over year in second-quarter 2023. The APUS segment has been benefiting from the increase in military-related registrations from students utilizing TA and increased tuition for nonmilitary students.
Enrollment momentum continued for the 14th consecutive quarter at HCN, achieving growth of 22% year over year in the second quarter. HCN benefited from its expansion into Michigan, witnessing over 100 new student enrollments in the summer of 2023. This brings the total enrolled student count to more than 275 by the third quarter. The growth is primarily driven by grassroots efforts, resulting in lower marketing expenses during the first three quarters of 2023.
Despite higher costs, inflationary pressure and tepid RU enrollment, APUS and HCN’s revenue increased by 5.2% and 24.2% year over year in the second quarter, respectively. The upside was backed by successful marketing efforts and the execution of enrollment strategies. The company expects the segments revenue growth and year-over-year margin expansion to continue through the end of the year.
Cost Control Measures: APEI has undertaken several initiatives to address increasing cost pressure. In August 2023, the company initiated measures to optimize the cost structure of both Rasmussen and the entire APEI enterprise, aiming to better align with the current revenue profile. These efforts are projected to reduce annual operating expenses by $12.4 million, including $2.8 million in pre-tax cash expenses for employee severance costs in third-quarter 2023. Additionally, starting in the third quarter, APEI plans to reduce certain nonlabor costs by approximately $800,000 to $1.1 million annually.
The company's Board of Directors is implementing measures to decrease overall governance structure costs, as part of these cost-saving initiatives. These actions includes, maintaining the APEI Board compensation structure for the third consecutive year in 2023 and reducing the size of the Board.
Affordable Tuition to Drive Growth: The skill gap and increased cost of higher education have been threatening the nation. Workers are forced to take expensive courses to improve their skills. American Public continued to be a leader in affordability and value. By creating affordable pathways to support employment and career advancement, it aims to help learners of all backgrounds maximize their higher education return on investment.
Although in April 2023, the company implemented tuition and fee increases for its nonmilitary and veteran students, it remains lower than the average in-state cost at public universities. This signifies the company's commitment to providing exceptional value and a favorable return on higher education investment for students.
Image Source: Zacks Investment Research
Concerns
In the past three months, shares of APEI have declined 1.7% against the industry’s 16.4% rise. Over the last few quarters, American Public has been experiencing increased costs, ultimately denting profitability. Total costs and expenses (excluding impairment charges) increased by 1.7% year over year in second-quarter 2023. Adjusted EBITDA declined 39.6% year over year. This upside was attributed to the increased employee compensation costs, bad debt expenses, building rent and maintenance costs, along with technology costs, partially offset by a decrease in advertising costs.
Also, the tepid performance of its RU segment is affecting the company’s growth prospects. During second-quarter 2023, The RU segment’s revenue declined 18.7% to $52 million from a year ago. RU’s total student enrollment fell 12.6% from the prior-year period’s levels to 13,900 due to a 21.9% decline in nursing and a 2.6% decline in non-nursing enrollment.
Key Picks
Some better-ranked stocks from the Zacks Consumer Discretionary sector are:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 28.5%, on average. The stock has surged 128% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) suggests growth of 54.5% and 180.3%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) currently flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 147.9%, on average. The stock has gained 50% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS suggests increases of 104.9% and 537.9%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) carries a Zacks Rank #2 (Buy) at present. It has a trailing four-quarter earnings surprise of 42.6%, on average. The stock has gained 30.8% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates growth of 44.5% and 117.9%, respectively, from the year-ago period’s levels.