By Richard Vedder
Equities in 2008 averaged share prices down around 40 percent, one of the worst drops in U.S. history. Yet the for profit higher ed sector seems to be holding up remarkably well. DeVry, an old traditional company, has it stock price now roughly double what it was five years ago. Apollo, the industry leader (U. of Phoenix) is also doing well, showing record sales and earnings.I have seen some positive financial data on Kaplan Higher Education that is truly breathtaking, and that company is the financial savior of a parent company better known for its newspaper (the Washington Post) and magazine (Newsweek).
Now there has been revealed data on one of the rising new stars, Bridgepoint Education, a company whose corporate board I have spoken too on multiple occasions. It is going public, and new SEC filings tell a story of extraordinary growth and profitability. In 20005, revenues were $8 million and losses were even greater. In 2006, revenues claimed to beyond $28 million and losses fell significantly. By 2007, sales had tripled again, and the firm made a modest profit. It looks to me as if sales this year will exceed $200 million, with profits equal to around one-tenth that amount. Rapid growth and taking advantages of large economies of scale, Bridgepoint has first rate leadership (Andrew Clark looks like a graduate student, but is a superb motivator and leader and former Apollo executive).
The Bridgepoint strategy seems to be a winning one. Buy up accredited existing not-for-profit institutions. Use these institutions as a vehicle for vast expansion, especially into on-line education (although Bridgepoint still has students residing on the campus of a former Catholic school renamed "Ashford University.") By buying accreditation, these institutions save time and hassle dealing with the cartels controlling entry into the field (accrediting organizations), although this strategy requires millions in start-up money.
Other initiatives, including privately held companies of Texas entrepreneur Randy Best, are also showing rapid growth. The huge advantages in efficiency that the for profits have are letting them rapidly expand market share and force conventional providers to start to act in a more entrepreneurial fashion, and become more lean and mean. This is a welcome development. The heck with US News & World Report rankings --these companies are making real money, and precisely because they are providing a service much wanted by the general public.
To readers of CCAP blogs and our friends, we wish you the happiest of New Years!!