Professional Documents
Culture Documents
Group
Financial Analysis Project
Prepared by:
Tim Kuehne
Contents
Project Basics 4
Institutions 5
Apollo Group 6
COMPETITOR ANALYSIS 8
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
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
Institutions
Carrington College
DeVry Brasil
DeVry University
Apollo Group
$ $
Income Statement
Balance Sheet
Inventory NA NA
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
DeVry APOLLO
$ $
Cash Flow
CURRENT PRIOR
Growth Ratios
Sales Growth -0.7% -2.1%
Income Growth -11.0% 22.1%
Activity Ratios
Profitability
Ratios
Profit Margin 7.0% 7.9%
Return on Assets 6.6% 7.8%
Liquidity Ratios
Current Ratio 1.87 1.82
Solvency Ratios
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
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.
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
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?
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?
DeVryEducationGroupInc.(DV) Watchlist
23.44 0.40(1.68%) NYSEAsof4:02PMEST
AfterHours:23.84 +0.40(1.71%)4:19PMEST
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.