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DeVry Education

Group
Financial Analysis Project

Prepared by:

Tim Kuehne
Contents
Project Basics 4

DeVry Education Group 5

from the corporate website 5

Institutions 5

Apollo Group 6

from the corporate website 6

Key Ratios: FY 2015 7

COMPETITOR ANALYSIS 8

Current vs Prior Year 10

Analysis 11

1) Based on the ratios, what are the primary differences between the corporation and the primary
competitor? What specific ratios explain the reasons for these differences? 11

2) In your opinion, does the corporation compare favorably or unfavorably to the primary competitor?
Give examples to support your conclusion. 12

Decisions 13

1) How would you assess the corporations revenue performance over the last few years? What are the
reasons for your assessment? 13

2) What factor will have the greatest influence in the determination of next years revenue? In what way
would this factor influence revenue? 13

3) What do you predict revenue to be next year? 13


4) How would you assess the income performance of the corporation over the last few years? 13

5) What do you predict net income to be next year? 14

6) How would you assess the corporations total asset growth rate? What evidence justifies your answer?
14

7) Do you expect total assets to increase, decrease, or remain relatively the same next year? Justify your
answer. 14

8) Do you believe the corporation will need additional financing to meet needs over the next few years?
Why or Why not? If financing is needed, do you believe the corporation would be able to obtain financing
easily? 14

9) Identify what you believe will be the three strongest aspects of the corporation. Describe why these
might be considered advantages. 15

10) Identify what you believe to be the three weakest aspects of the corporation. Is it likely these three
weakness can be overcome in the next few years? 15

11) Are you optimistic or pessimistic concerning the future of the corporation? What specific corporate or
industry characteristics influence your opinion? 15

12) Would you invest in the capital stock or bonds (if applicable) of this corporation if you had sufficient
funds? Would you rather invest in one of the corporations competitors? What are the reasons for your
decision? 16
4 DeVry Education Group

Project Basics

I. The name of the corporation I will analyze is DeVry Education


Group.

II. The corporate headquarters are located in Downers Grove, IL.

III. The fiscal year for DeVry ends on June 30th.

IV. The primary (and only) service of this company is higher-


education.

V. For the purposes of this project I will us DeVrys primary


competitor Apollo, parent company of the University of
Phoenix.
5 DeVry Education Group

DeVry Education Group


About Us
The purpose of DeVry Education Group is to empower its students to achieve their educational
and career goals. DeVry Group (NYSE: DV; member S&P MidCap 400 Index) is a global
provider of educational services and the parent organization of American University of the
Caribbean School of Medicine, Becker Professional Education, Carrington College,
Chamberlain College of Nursing, DeVry Brasil, DeVry University and its Keller Graduate School
of Management, Ross University School of Medicine and Ross University School of Veterinary
Medicine. These institutions offer a wide array of programs in healthcare, business, technology,
accounting, finance and law.
from the corporate website

DeVry Education Group is an for-profit higher-education corporation with headquarters


in Downers Grove, Illinois. Their fiscal year ends on June 30th in between school
years.

Institutions

University of the Caribbean School of Medicine

Becker Professional Education

Carrington College

Chamberlain College of Nursing

DeVry Brasil

DeVry University

Ross University School of Medicine

Ross University School of Veterinary Medicine


6 DeVry Education Group

Apollo Group

Apollo Education Group, Inc. was founded in 1973 in response to a gradual


shift in higher education demographics from a student population dominated by
youth to one in which approximately half the students are adults and over 80
percent of whom work full-time. Apollo's founder, Dr. John Sperling, believed
and events proved him rightthat lifelong employment with a single employer
would be replaced by lifelong learning and employment with a variety of
employers. Lifelong learning requires an institution dedicated solely to the
education of working adults.
from the corporate website

Apollo Education Group, Inc. is a for-profit higher-education corporation with


headquarters in Phoenix, Arizona. Their fiscal year ends August 31.
7 DeVry Education Group

Key Ratios: FY 2015


DeVry APOLLO

$ $

Income Statement

Revenue 1,909,943 2,566,277

Cost of Revenue Sold 1,000,055 1,207,535

Interest Expense 5,313 6,595


Tax Expense 18,537 58,163

Income from Cont Op 134,323 47,480

Net Income 139,899 29,755

Prior Year Revenue 1,923,371 2,996,865

Prior Year Income from 150,989 221,430


Continuing Operations

Balance Sheet

Cash 363,765 702,074

Short Term Investments 3,579 194,676

Accounts Receivable 180,621 266,934

Inventory NA NA

Current Assets 601,057 266,934


Long Term Investments NA NA

Net Fixed Assets 545,874 370,281

Other Assets 51,202 29,129


Total Assets 2,074,193 2,204,795

Current Liabilities 321,909 832,344

Total Liabilities 489,383 1,048,322

Total Stockholders' Equity 1,584,810 1,144,558


8 DeVry Education Group

COMPETITOR ANALYSIS
DeVry Apollo
INCOME STATEMENT
COMMON-SIZE DATA
Gross Prot/Sales 47.60% 52.90%
Income from Cont Ops/Sales 7.00% 1.90%
BALANCE SHEET
COMMON-SIZE DATA
Current Assets/Total Assets 29.00% 12.10%
Current LiabiliFes/Total
15.50% 37.80%
Assets
LiabiliFes/Total Assets 23.60% 47.50%
Equity/Total Assets 76.40% 51.90%
PROFITABILITY RATIOS
Prot Margin 7.00% 1.90%
Return on Assets 6.60% 1.80%
Return on Equity 8.60% 4.10%
Dividend Payout RaFo 16.6% 0%
LIQUIDITY RATIOS
Current RaFo 1.87 0.32
Quick RaFo 1.70 1.40
SOLVENCY RATIOS
Debt/Total Assets 24.00% 48.00%
Times Interest Earned (Fmes) 29.77 17.02
OPERATIONAL RATIOS
Receivable Turnover (Fmes) 10.80 8.90
Inventory Turnover (Fmes NA NA
9 DeVry Education Group

PRIMARY COMPETITOR ANALYSIS-2

DeVry APOLLO

$ $

Prior Year Accounts Receivable 172,300 309,269

Prior Year Inventory NA NA

Prior Year Assets 1,997,636 3,092,935


Prior Year Liabilities 464,243 1,848,282

Prior Year Stockholders' Equity 1,533,393 1,180,126

Cash Flow

Cash Flow from Operations 203,107 168,582

Dividends Paid 23,230 0

Interest Paid 5,313 6,595


10 DeVry Education Group

Current vs Prior Year

CURRENT PRIOR

Growth Ratios
Sales Growth -0.7% -2.1%
Income Growth -11.0% 22.1%

Asset Growth 3.8% 7.6%

Activity Ratios

Receivable Turnover 10.8 11.3


Inventory Turnover NA NA

Fixed Asset Turnover 3.5 3.5

Profitability
Ratios
Profit Margin 7.0% 7.9%
Return on Assets 6.6% 7.8%

Return on Equity 8.6% 10.3%

Dividend Payout Ratio 16.6% 16.3%

Price Earnings Ratio 14.0 20.5

Liquidity Ratios
Current Ratio 1.87 1.82

Quick Ratio 1.70 1.71

Solvency Ratios

Debt to Total Assets 0.24 0.23

Times Interest Earned 29.77 50.20


(Accrual)

Times Interest Earned 39.23 74.12


(Cash)
11 DeVry Education Group

Analysis
1) Based on the ratios, what are the primary differences between the corporation
and the primary competitor? What specific ratios explain the reasons for these
differences?

There are many differences between these companies, and I will try to briefly outline
what I believe to be the most significant

1. Income from Continuing Ops/Sales. This ratio, especially when examined along side
gross margin, raises some significant questions about these companies. Gross
margin for both companies is around 50%, a very strong number. Apollo, with 30%
more revenue than DeVry, is just 5% higher on gross margin. Now the fascinating
part. They plummet on income from continuing operations/sales. If it was not the
same for both companies, I would be inclined to think they had sold off or were in the
process of selling off a portion of their business. Since this is highly unlikely to be
happening in both companies, I believe this to be from investment strategies. I would
think this would put the companies on rocky ground. DeVrys continuing ops. ration is
7% while Apollos sings to 1.9%. Even with much more revenue, apollo seems to be
in a bad financial position.

2. Return on Equity. This ration again shows its financial strength over the behemoth
Apollo. A highly secure treasury bond will return 2-4%. If a company is not returning
significantly more than this, it is a waste of money in most investors eyes. Apollo
barely surpasses this threshold sitting at 4.1%. Though DeVrys number is not overly
impressive, its 8.6% ROE is significantly stronger. Combining this with the fact that
DeVry consistently pays yearly dividends, whereas Apollo does not, and an investors
choice between the two companies should be pretty cut and dry.

3. Current Ratio. This number gets very scary for Apollo. The current ratio measures
current assets versus current liabilities. This number shows how easily a company
can pay its bills. A ratio of 1 means just enough, but a bank will not lend money to
most companies that are anywhere near one. At 1.89 DeVry isnt in outstanding
position, but there is no need to jump ship. Apollo however must to some quick
thinking. They are will below 1. At 0.32 it appears Apollo is going to have to do some
very swift maneuvering to even make it through the year.
12 DeVry Education Group

2) In your opinion, does the corporation compare favorably or unfavorably to the


primary competitor? Give examples to support your conclusion.

I believe the competitor, Apollo, compares unfavorably to DeVry. Simply looking at


revenue it appears that Apollo is a much larger more successful company. However, net
income for Apollo is less than 25% of that of DeVry. As already discussed in the above
question, Income from Continuing Operations/Sales, Return on Equity, and Current ratio
all paint a picture that is much stronger for DeVry.

One of the strongest arguments that I see right now, and will discuss further later is the
stock performance of DeVry vs Apollo. DeVry seems to be much less volatile, and
though both stocks are experiencing a reduction in value, DeVrys stock is valued
significantly higher.
13 DeVry Education Group

Decisions
1) How would you assess the corporations revenue performance over the last
few years? What are the reasons for your assessment?

Higher Education has been pinched financially over the last ten years. There are
increasingly less students in high schools which means there are fewer students
available for college enrollment. This is the primary reason why you can now see a large
amount of higher education advertising targeted towards nontraditional students
(students over 25). This being said I assess DeVrys performance very well. Its primary
competitor, Apollo Education Group (parent company of University of Phoenix), has seen
a 31.7% reduction of revenue over the last three fiscal years. During the same time
period DeVry only endured a 2.8% reduction in revenue.

2) What factor will have the greatest influence in the determination of next years
revenue? In what way would this factor influence revenue?

The factor that has the largest influence in revenue for an institution of higher education
is enrollment. The more students you bring in, the healthier your institution should be.
There are other factors such as gifts from generous benefactors such as grateful alumni,
but these are usually one time gifts and do not necessarily speak to an institutions
effectiveness or well being.

3) What do you predict revenue to be next year?

Revenue at DeVry has stayed relatively constant over the past three years. From
2013-2014 DeVry saw a 2.09% reduction in revenue, but only a 0.7% reduction from
2014-2015. With the same 0.7% reduction DeVry should see revenue of $1,896,943.

4) How would you assess the income performance of the corporation over the
last few years?
Even with a reduction in enrollment and therefore revenue, DeVry saw an increase in Net
Income every year over the past three years. This is very impressive, and shows sound
business decisions.
14 DeVry Education Group

5) What do you predict net income to be next year?

Over the past five years DeVry usually had Net Income around $134,000-$141,000. FY
2015 had income of $139,899 and I expect it to be very similar for FY 2016. Most likely
DeVry will see net income of around $139,500 next year.

6) How would you assess the corporations total asset growth rate? What
evidence justifies your answer?

Despite a decrease in Income from Continuing Operations of 11% between FY 2014 and
FY 2015, Net Income saw a slight increase. Also, the Asset Growth Rate for FY 2015 was
positive at 3.8%. This has been accomplished through an increase in liabilities.
However, from my observations it seems that this increase has been very small and that
financial decisions have been handled responsibly to allow the company to have a slight
increase in assets.

7) Do you expect total assets to increase, decrease, or remain relatively the same
next year? Justify your answer.

Total assets will probably begin to decrease if DeVry does not find a way to increase
enrollment. Unlike Phoenix, DeVry has many physical locations. I believe they will need
to begin seriously considering closing some of these and moving to more online
programs in order remain a strong competitor.

8) Do you believe the corporation will need additional financing to meet needs
over the next few years? Why or Why not? If financing is needed, do you believe
the corporation would be able to obtain financing easily?

DeVrys ration of Liabilities to Total Assets is much better than their primary competitor.
Also there Debt to Total Assets ratio is very small. I think if DeVry decides to sell off
some of their physical addresses they may be able to avoid additional financing.
However, they have a strong financial position and should be able to obtain financing if
there plans require it.
15 DeVry Education Group

9) Identify what you believe will be the three strongest aspects of the corporation.
Describe why these might be considered advantages.

DeVry has been a household name much longer than Phoenix and other for-profit
institutions. This alone is a huge advantage for DeVry. There is still a question of
legitimacy that comes to mind when considering Phoenix that does not seem to be an
issue for DeVry. Phoenixs parent company Apollo has a much larger market share than
DeVry, however, simply glancing at the ratios and data over the past several years shows
that DeVry is a much more stable organization. The fact that DeVry has been able to
maintain positive asset growth as well as increasing income in the face of decreasing
revenue, speaks volumes for the companies board of directors. The final advantage I
would like to mention is that DeVry consistently pays dividends, even in the face of
decreasing revenue. This shows the shareholders that the company is confident in its
future and will allow it to maintain the strong share price it currently holds.

10) Identify what you believe to be the three weakest aspects of the corporation.
Is it likely these three weakness can be overcome in the next few years?

As stated previously the primary weakness, present throughout higher education, is


decreasing enrollment. It is important the only sector of higher-ed to see any growth is
in for-profit institutions like DeVry. The growth in for-profit institutions however is mainly
due to the flexibility online programs (the basis of most for-profit institutions) offers
nontraditional students. DeVry, though it does have some on-line programs, focuses
primarily on traditional classroom courses. If DeVry begins to offer more online
programs in high growth areas, it will be able to battle the enrollment drop.

11) Are you optimistic or pessimistic concerning the future of the corporation?
What specific corporate or industry characteristics influence your opinion?

DeVry, even though it has had some bad press, has by and large had a very good
reputation as an institution of higher learning. If DeVry finds a way to provide the high
quality education it is known for in an online format, DeVry can potentially have a great
future. DeVry has always been strong in two areas: business and computer technology.
Health care is an area of high growth that though DeVry does offer some programs in, it
has not yet maximized on its potential. I think the people at DeVry already know these
things. They were careful to not jump to far into online learning too fast and have been
16 DeVry Education Group

able to observe the failures of other institutions. DeVry Education Group has a very
stable and strong stock value where as the behemoth Apollo Group (University of
Phoenix, et. al) has had a very rough few years. I am very confident, as it appears share
holders are as well, that DeVry is going to come out on top of the for-profit sector.

12) Would you invest in the capital stock or bonds (if applicable) of this
corporation if you had sufficient funds? Would you rather invest in one of the
corporations competitors? What are the reasons for your decision?

12/12/2015 DV Interactive Stock Chart | Yahoo! Inc. Stock - Yahoo! Finance

DeVryEducationGroupInc.(DV) Watchlist
23.44 0.40(1.68%) NYSEAsof4:02PMEST
AfterHours:23.84 +0.40(1.71%)4:19PMEST

Indicator Comparison 1d 5d 1m 3m 6m YTD 1y 2y 5y 10y Max Linear Go To Symbol

50.00%
Open 23.64 DV 23.44 APOL 7.16
Close 23.44
Low 23.26
High 23.71
Vol 437.20K 25.00%
% Chg -49.09%

0.00%

-25.00%

-50.00%
-49.09%

-75.00%

-81.39%

D D D D D D D D D D
-100.00%
437.20K
Jan 3 11 Jan 2 12 Jan 7 13 Jan 6 14 Jan 5 15

The blue section above represents the stock value of DeVry over the last line with the
Red line representing Phoenix. They move very similar, but there are two significant
things to notices. DeVry started to fall in late 2011 before Apollo in 2012. In fact, Apollo
tends to move in a similar direction as DeVry, just later. Also, it appears that Apollo is
more volatile than DeVry. DeVrys stock appears to be due for a resurgence. Its stock
price is fairly low right now making it the perfect time to buy. Apollos stock right now is
even less expensive, but I feel more confident in DeVrys ability to weather this storm.

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