Sector Watch: Education stocks
An increasingly global economy and growing technology demand support a robust growth outlook for Ambassadors Group, Inc. (Nasdaq: EPAX) and GP Strategies Corporation (NYSE: GPX), two education stocks with a propensity for prosperity.
Ambassadors Group, an educational travel company, organizes and promotes international and domestic travel programs for students, athletes and professionals. As part of its Student Ambassador program, grade school, middle school and high school students travel abroad to learn about their host country’s history, economy, government and culture. The company’s Sports Ambassador program enables student athletes to explore a host country and participate in local sports tournaments. Through the company’s Professional Ambassador program, business executives can travel abroad to meet and exchange ideas with foreign citizens having similar professions and backgrounds.
The company markets its programs through direct mail, seminars and through strategic partnerships with the University of Pittsburgh, the American Bar Association and several national travel-related organizations.
During the nine months ended Sept. 30, 2007, Ambassadors Group’s revenues increased 28% year-over-year to $263.8 million from $206.9 million and net income jumped 20% year-over-year to $38.5 million, or $1.98 per share, from $32.1 million or $1.56 per share.
The company has worked with nearly 50,000 students, athletes and professionals year-to-date, up 23% from the prior year. While the company cautions comparisons may be lower next year due to the weakness of the U.S. dollar against the euro, the long-term outlook remains favorable.
Analysts are forecasting 18% average annual growth for Ambassadors Group over the next five years. These shares have plummeted from a $40 range earlier this year because of management’s reduced 2008 guidance. My $25 price target for Ambassadors Group is above the current price of $18.30. Over the last 52 weeks, shares have ranged between $16.80 and $41.08.
Turning to education of a different kind, GP Strategies, through its subsidiaries, provides training, engineering and consulting services in the United States and abroad. Its training services include fundamental analysis of a client’s training needs, curriculum design, instructional material development, IT service support and delivery of training. Consulting services are also training-oriented and focus on business management, engineering and related disciplines. The company’s engineering services consist of procedure writing, plant start-up assistance, logistics support, implementation and engineering assistance, staff augmentation and help-desk support.
GP Strategies Corp. also offers e-learning solutions and management of a customer’s training departments. The company has more than 500 customers, including Fortune 500 automotive manufacturers, utilities, software vendors, and electronics companies, the U.S. government, government contractors and multinational corporations.
A large, expanding market for outsourced training supports my growth expectations for this stock. According to Training Magazine’s 2006 industry report, training industry revenues grew 7% last year to $55.8 billion and included a 17% increase in outsourced training products and services.
During the nine months ended Sept. 30, 2007, GP Strategies Corp.’s revenues rose 34% year-over-year to $178 million from $133.4 million and net income grew 41% year-over-year to $6.9 million, or $0.40 per share, from $4.9 million, or $0.28 per share. Analysts expect GP Strategies Corp. to produce 40% growth this year and next year and 25% average annual growth over the long-term. My $15 price target for GP Strategies Corp. (GPX) is above the current price of $8.89. Shares have ranged between $7.54 and $11.73 for the last 52 weeks.
