Investing Trivia -- Raising the Bar

According to Bloomberg, profit forecasts have shrunk across the board for every industry. There are now more than 3,500 companies whose 2009 EPS estimates are lower today than they were 90 days ago. But which of these companies is actually raising its earnings estimates from $3.49 per share in 2009 to $3.80, with some of the more optimistic projections even calling for $4.00?

A.) Apollo Group (APOL)
B.) General Motors (GM)
C.) Home Depot (HD)
D.) Philip Morris (PM)
E.) Starwood Hotels (HOT)

Published: February 11, 2009

The correct answer is (A.) Apollo Group (APOL)

Shares of APOL have been marching steadily higher -- setting record highs, in fact -- and it's easy to see why.

Historically, the company's flagship University of Phoenix (which has campuses around the country and online classes worldwide) was geared primarily toward working adults. Education is a highly scalable business, and spreading a largely fixed cost structure among tens of thousands of new students each quarter is driving powerful growth in earnings and cash flows. Thanks in part to a national branding campaign and the counter-cyclical nature of education, APOL's student population has swelled to 385,000 -- an impressive increase of 60,000 (+18.4%) over this point last year. In fact, Apollo has brought in more new students over the past 12 months than rivals ITT (NYSE: ESI) and DeVry (NYSE: DV) have in total.

The influx (and an improving retention rate) helped revenues jump +24% last quarter to $971 million. Earnings for the period climbed +35% to $1.12 per share, surprising analysts who were expecting less than $1.00 per share. Now, the group is targeting earnings of $3.80, and the more optimistic projections are calling for nearly $4.00. Even the most pessimistic forecast of $3.55 per share still represents healthy bottom-line growth of +25% for the year.

Overall, Apollo is a dominant player in an attractive and growing industry, and one of the few companies with high hopes for a record year in 2009. But it's not the only fat fish in the sea. By using StreetAuthority's advanced screening software, editor Nathan Slaughter has found a few standouts. In his latest issue of the Half-Priced Stocks newsletter, Nathan lists 10 other companies whose profit outlooks have been raised, not lowered. Better still, these firms were already expected to deliver healthy double-digit earnings growth for the year. As a group, they have rebounded nearly +90% off their lows, but all are still trading below fair value. It's a list that every investor ought to see. To learn the names of these stocks, and to learn more about Half-Priced Stocks, please visit this link.

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