4 For-Profit Education Stocks To Enrich Your Portfolio
Zacks Investment Research | Nov 13, 2017 10:07PM ET
For-profit education companies have been on the radar since the victory of Donald Trump, as less arduous regulatory environment was assured for such companies during his campaign.
Regulatory Battle
In June 2017, the U.S. Department of Education made announcements to revise for-profit education industry regulations. The department expressed its intention to form a committee to rewrite the Borrower Defense to Repayment and Gainful Employment system, intended to protect students from misleading advertisements of programs and high debt burden.
The Obama administration had revised the regulation last year in order to simplify the debt relief claims process and shift the loan burden more onto schools. These were slated to be put into effect in July 2017, but the U.S. Secretary of Education Betsy DeVos deferred the implementation for a year.
DeVos is of the view that the current regulation “is a muddled process that's unfair to students and schools, and puts taxpayers on the hook for significant costs.” She assured that the revised regulations will be fair and balanced for educational companies and will also protect students from fraudulent practices and deceptive claims.
DeVos’ decision to delay the implementation till July 2019 led to a legal protest against her by a group of 19 state attorneys general. Critics believe that the revised rules are more in favor of “predatory” for-profit education companies than loan-burdened students. Also, the fact that not a single debt relief claim has been approved since DeVos took office has enraged critics all the more.
In the Spotlight
Among other developments, two key players in the industry — Strayer Education Inc. (NASDAQ:STRA) and Capella Education Inc. (NASDAQ:CPLA) — agreed to an all-stock merger in a deal valued $1.9 billion. The combined company will be named "Strategic Education Inc." and will trade under the ticker symbol STRA. The deal announcement came at a time when the for-profit school industry is grappling with market challenges and tougher regulations. Enrollments have been sluggish due to stringent laws, and intensifying competition. The combined entity is expected to ensure student success and positive employment outcomes.
Meanwhile, for-profit education companies are coming up with ad campaigns, investing in digital capabilities and stepping up social media efforts to enhance brand value as well as boost enrollment. Additionally, companies are improving their technology and infrastructure, increasing investments to improve the academic quality and retain students, buying complementary businesses and regularly introducing new programs and specializations to boost student outcome.
Get The News You Want
Investors are taking notice of the positive changes in the industry and for-profit school stocks are witnessing a strong rally under Trump and DeVos. The Zacks Investment Research
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