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Analyst Blog

On Sep 27, we issued an updated research report on Capella Education Company (CPLA - Free Report) – a provider of online post-secondary education services in the U.S., with primary focus on working adults.

Capella Education reported impressive results in the first two quarters of 2016, with revenues, enrollment levels and earnings showing significant improvement. Total enrollment growth in the quarters was driven by higher enrollment under FlexPath programs, improved early-cohort persistence and increased percentage of returning learners.

Expanding Product Portfolio

Working adults’ need to attain additional education in order to secure better jobs has been driving demand for Capella Education’s programs. Cappella Education has expanded its product portfolio with continuous innovation like FlexPath and RightSkill programs in order to boost enrollment numbers and long-term growth. Also, the company has acquired on Apr 22, 2016 Hackbright Academy and DevMountain in order to invest in non-degree programs. These programs focus on bridging the skill gap in the market and should appeal to working adults as well as employers, thereby driving the company’s top line in the near future.

Apart from that, Capella University’s programs offer high-quality educational experience, which drives strong outcome. In order to improve enrollment and efficiency and to build greater brand awareness, the company is shifting from a direct-marketing aggregator channel to a relationship and brand-driven strategy. The company interacts with prospective learners and builds relationships in the process in order to generate higher-quality inquiries and better conversion rates. In addition, the company has shifted toward long-term marketing, which has improved its brand awareness over the last two years.

Soft Near-Term Outlook

Though the company expects new enrollment and total enrollment to be positive in 2016, impressive enrollment results are unlikely before 2017. Moreover, a shift in the student mix from PhD to the masters’ degree programs is hurting revenue per student.

Capella Education currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other favorably ranked stocks in this sector include Lincoln Educational Services Corporation (LINC - Free Report) , Central Garden & Pet Company (CENT - Free Report) and SodaStream International Ltd. (SODA - Free Report) , all with a Zacks Rank #1 (Strong Buy), You can see the complete list of today’s Zacks #1 Rank stocks here

Full-year 2016 earnings are expected to increase 88% for Lincoln Educational and 2.94% for SodaStream. Meanwhile, Central Garden & Pet Company’s fiscal 2016 earnings are likely to increase 61.71%.

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