For-Profit Education Sales & Receivables Analysis

Below is an analysis of the sales and receivables of several for-profit education companies. There are generally 4 main reasons that receivables outpace sales:

(1) Difficulty with collecting from customers.
(2) Aggressive booking of revenue.
(3) Change of credit policy to easier terms.
(4) A recent acquisition.

Of these companies listed below, a few standout, with receivables far outpacing sales. These companies include ITT Educational Services (ESI), Corinthian Colleges (COCO), DeVry (DV), and Capella (CPLA). Career Education Corp. (CECO) looks like it has already seen a reversal of fortunes in the back half of 2008, and it shows in the current multiple it’s receiving. Strayer (STRA) and Apollo (APOL) ought to be watched closely here as similar variables impact their business. Troubles with receivables could deflate the rich multiples most of these companies have been assigned.

Comps.

Strayer (STRA): 6.6x Sales, 18.6x EBITDA

Apollo (APOL): 3.65x Sales, 13x EBITDA

Capella (CPLA): 3.5x Sales, 15.77x EBITDA

DeVry (DV): 3x Sales, 16x EBITDA

Career Education Corp. (CECO): 1x Sales, 9.84x EBITDA

Corinthian Colleges (COCO): 1.3x Sales, 14.29x EBITDA

ITT Educational Services (ESI): 4x Sales, 12.49x EBITDA

Mean: 3.29x Sales, 14.28x EBITDA

Median: 3.5x Sales, 14.29x EBITDA

High: 6.6x Sales, 18.6x EBITDA

Low: 1x Sales, 9.84x EBITDA