Today John Reese recommends a stock that scores well on his tests of both earnings growth and value characteristics.
Bridgepoint Education (BPI)
from Validea Hot List
Strategy: Price/Sales Investor
Based on: Kenneth Fisher
Bridgepoint Education is a provider of postsecondary education services. The company’s academic institutions include Ashford University and University of the Rockies. Its institutions deliver programs primarily online, as well as at their traditional campuses. As of December 31, 2011, the Company had 86,642 total students enrolled in its institutions.
Analysis
Price/Sales Ratio: Pass
The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratio between 0.75 and 1.5 are good values. BPI’s P/S ratio of 1.22 based on trailing 12 month sales, falls within the “good values” range for non-cyclical companies and is considered attractive.
Total Debt/Equity Ratio: Pass
Less debt equals less risk according to this methodology. BPI’s Debt/Equity of 0.00% is exceptional, thus passing the test. ...
Preliminary Grade: Some Interest in BPI At this Point
Is BPI a “Super Stock?” No.
Price/Sales Ratio: Fail
To be considered a “Super Stock,” non-cyclical (non-Smokestack) companies should have Price/Sales ratios below 0.75. However, BPI, who has a P/S of 1.22, does not fall within the “Super Stock” range. It does fall between 0.75 and 1.5, which is considered the “good values” range for non-cyclical companies. Nonetheless, it does not pass this “Super Stock” criterion.
Long-Term Eps Growth Rate: Pass
This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. BPI’s inflation adjusted EPS growth rate of 26.74% passes the test.
Free Cash Per Share: Pass
This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. BPI’s free cash per share of 2.11 passes this criterion.
Three-Year Average Net Profit Margin: Pass
This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. BPI, whose three year net profit margin averages 16.54%, passes this evaluation.
Guru Score: 90%.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, October 25, 2013