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Re Corinthian Colleges - The Case for Growth
Posted by: batbeer2 (IP Logged)
Date: August 27, 2013 09:28AM

>> In the second of those articles you mentioned, the author has gone for COCO - hook line and sinker - after confessing to not being sure in the first article. Seems extreme:

I see what you mean. Then again, I believe the author is relatively young. If your portfolio is worth say.... 3x your monthly income, your behaviour may be different than if your portfolio is worth 5x your annual income.

Just speculating here....



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Re Corinthian Colleges - The Case for Growth
Posted by: swnyc2 (IP Logged)
Date: August 29, 2013 02:43PM

Dear Batbeer2,

Any thoughts on the latest 10-k?

Regards,



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Re Corinthian Colleges - The Case for Growth
Posted by: batbeer2 (IP Logged)
Date: August 29, 2013 03:52PM

Hi Swnyc2,

LOL..... 10-k, what 10-k?

At this point in time the SEC hasn't got it on its site ;o)
I'll let you know what I think when I've read it.



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Re Corinthian Colleges - The Case for Growth
Posted by: swnyc2 (IP Logged)
Date: August 29, 2013 08:29PM

Dear Batbeer2,

Sorry. I meant today's 8-K.

Regards,



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Re Corinthian Colleges - The Case for Growth
Posted by: swnyc2 (IP Logged)
Date: August 30, 2013 09:29PM

Here's a recent article that might be of interest for those interested in investing in this sector.



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Re Corinthian Colleges - The Case for Growth
Posted by: vgm (IP Logged)
Date: August 31, 2013 02:21AM

Thanks swnyc. Interesting article.



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Re Corinthian Colleges - The Case for Growth
Posted by: swnyc2 (IP Logged)
Date: September 2, 2013 05:37PM


Not a good week for COCO share holders.

The stock tanked after the most recent earnings report: down 6% on Friday, down 18% for the week.

Salient points from the call include:
  • Net revenue was $377.5 million versus $387.9 million, a decrease of 2.7% (4QFY13 vs. 4QFY12).
  • Total student population at June 30, 2013 was 81,284 versus 90,794 at June 30, 2012, a decrease of 10.5%. The decrease in student population was due to decreased on-line enrollment.
  • The company projected FY14 annual diluted earnings per share of only $0.10 - $0.15 per share.

In their most recent 8-K, they also mentioned that:
Cash flow from operations was $41.5 million in the year ended June 30, 2013, versus $152.8 million for the year ended June 30, 2012. The decrease is primarily due to the timing of cash receipts and payments.

Debt and capital leases (including current portion) totaled $139.1 million at June 30, 2013, compared with $149.0 million at June 30, 2012.
Capital expenditures were $44.1 million for the year ended June 30, 2013, versus $42.2 million for the year ended June 30, 2012. (They projected Capex to be about $40 million for 2014.)

While compliance with old regulatory rules appears not to be a material issue, new proposed rules may present problems in the future.




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Re Corinthian Colleges - The Case for Growth
Posted by: batbeer2 (IP Logged)
Date: September 3, 2013 09:03AM

The 10-k is out and management has had their earnings call.

My observations (*) and comments (-):

* FY revenue is up.
* Total student population is down but ground-school population is growing.

- This reflects the ongoing transition to a higher quality full-time student population, formerly served by community colleges.

* Problems with the ED about "financial responsibility standards" are put to rest.
* Company has done a fan-tas-tic job of reducing default rates of its (former) students.

- The improvement is not "cosmetic" as previously thought but seems fundamental.

* FY earnings of roughly $0.20 per share are wiped out by yet another one-time charge of $25m.
* 40k students graduated from COCO this year.
* SG&A has been declining. From $205m in 2011 to $165m this year.

- Management expects to reduce costs by $40m next year. This would bring SG&A in line with 2009. Increased efficiencies will come from automation of regulatory reporting process and consolidating of schools into fewer OPEIDs. With their Heald schools, they now have one regulatory entity where they first had 9. This was approved by the ED in the quarter.

* Management expects some growth this year.



OK.... though this is taking longer than I thought, the thesis has not been disproved. On the contrary.

I'm hanging on. See if management can deliver on their promises. IMHO they have managed the worst problems/risks very well.

In November, the talk was about student default rates and a possible letter of credit to the ED. Now it's the possibility of another round of even more onerous regulations. While I don't know what future regulations will look like, I think it's clear COCO, unlike the competition, has shown it is able to adapt.... Darwin.

Just some thoughts.



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Re Corinthian Colleges - The Case for Growth
Posted by: swnyc2 (IP Logged)
Date: September 9, 2013 10:43PM

Dear Batbeer2,

You're right that the company has done a good job reducing its default rates (as they are currently defined).
However, by their own admission, they have not done a good job with their on-line enrollment

Including the $40M in cost reductions
, management is predicting earnings of only $0.10 - $0.15 per share for FY 14.
WIth a P/E of ~15, I can see how that gets us to ~$2 per share, which reflects the market price of the stock today.

On 8/18/2010, you gave COCO a fair market value of $13 per share.
In November 2012, you felt that earnings of $0.55 per share was pessimistic.

Do you still believe in such a large upside?
I have to give you a lot of credit for patience. You've been holding this stock much longer than I.

What do you think it's going to take before we see good, old fashioned earnings increase?



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Re Corinthian Colleges - The Case for Growth
Posted by: batbeer2 (IP Logged)
Date: September 10, 2013 12:42AM

>> Do you still believe in such a large upside?

Yes.

>> I have to give you a lot of credit for patience. You've been holding this stock much longer than I.

Not sure if that's something to be proud of ;o)

Like with QUAD and AHC I can see the profit slowly making its way to the bottom line already, even though the earnings have been negative for years. Revenue is flat/up yoy. SG&A is down. In addition, the fundamentals (student mix, default rates etc.) are much better today than they were a year ago.

A lot of people wouldn't believe it could be done. It is now done. The issues to me seem much smaller this year. Now they've saying they are going to take out $40m of costs. I think that's a realistic goal. Add that back to this years pre-tax earnings assuming 0 growth for the year...... If they don't generate at least $30m of after-tax earnings this year, it will be a surprise to me. If so I may have to conclude I'm out of my depth/wrong.

One more year. That would make it two years since I wrote this article. I don't think two years is too long to see a thesis work out (or not).



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