Why American Public Education Shares Got Taken to School

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Online post-secondary education provider American Public Education (NAS: APEI) is putting on the dunce cap today after its shares fell as much as 15% following its first-quarter earnings results.

So what: For the quarter, American Public reported net income of $0.50 as revenue rose 29% to $75.8 million. Both figures surpassed Wall Street's expectations for a profit of $0.47 on revenue of $74.9 million. The big, and highly negative, news was the company's second-quarter guidance, which wound up putting its stock in detention. American Public now expects a significant slowdown in new-student sign-ups (just 2%-4%) in the upcoming quarter to negatively affect earnings. It forecast earnings of $0.41-$0.47 versus the current consensus estimate of $0.51 and was promptly downgraded by five brokerage firms.

Now what: For-profit online education is a dangerous place to be investing at the moment. The government is in the process of adjusting the way in which these schools can receive federal loan assistance, and we're seeing that negative backlash, as well as an increase in competition between online universities, beginning to affect nearly everyone's bottom line. Even following today's drop, the risk-versus-reward ratio for the for-profit education sector is still so greatly skewed toward the risk aspect that I'd just as soon pass.

Craving more input? Start by adding American Public Education to your free and personalized watchlist so you can keep up on the latest news with the company.

At the time thisarticle was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool owns shares of American Public Education.Motley Fool newsletter serviceshave recommended buying shares of American Public Education. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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