Thursday, September 15, 2011

Research: Devry DV

Devry (DV) caught my eye after a large drop recently. An agency went undercover to see if some for-profit colleges were using questionable tactics in order to get more students. People posed as students to see how admissions advisors operated. For-profit colleges have a reputation for accepting anyone so that they can receive money. Often, the money comes from financial aid from the government, so there is an interest from the government to know if the schools are making efforts to exploits students.

Although the report from the agency does not name any schools in particular, it is safe to assume that Devry, being one of the largest for profit schools, were one of the ones that were tested. Practices include agressive sales tactics like guilt trippig students to commit without letting them know their financial aid amount, taking tests for students so that they could appear qualified, and telling students to hide assets in order to receive more financial aid. These don't sound too much worse than tactics used at car dealerships.

After deciding that this undercover operation should have minimal impact on Devry, as in penalties applied by the government, I looked at the 10K. They are seeing a large decline in enrollment. Enrollment was down by 25% this year and 15% in the previous year. I also expect to see declines continue as the government cracks down on exploitive practicies. Devry is cash rich, with relatively low liabilities. I suspect that this is due to receiving money up front from students, loans, and grants. I think the liabilities are underreported as they can be counted as normal expenses later down the line in the form of paying professors, and rent for facilities. I believe that a large amount of their cash on hand is not money yet 'earned' as they have to provide the promised education in future years. Currently at PE of about 8-9, I think is marginal at best and that there are better opportunities.  I've decided not to get into Devry.

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