American Public Climbs 10% in 3 Months: Should You Buy, Hold or Fold?

Core Viewpoint - American Public Education, Inc. (APEI) is demonstrating strong performance in the education market, with a notable 10.4% increase in stock price over the past three months, outperforming industry peers and major indices [1][3]. Group 1: Enrollment and Revenue Growth - APEI's growth is driven by successful marketing and enrollment strategies, particularly among military-affiliated students utilizing VA benefits, leading to increased registrations at American Public University System (APUS) and Hondros College of Nursing (HCN) [2][7]. - For Q1 2025, APEI anticipates total revenues to rise by 4-6% year over year, projecting revenues between $161 million and$163 million, with APUS net course registrations expected to grow by 1.5% to 3% and HCN by approximately 10% [5][6]. - HCN segment enrollment grew by about 14.9% from 2023, attributed to new campus openings and relocations [9]. Group 2: Cost Management and Strategic Initiatives - APEI is implementing cost optimization strategies to mitigate inflationary pressures, including consolidating its degree-granting institutions into a single entity for streamlined operations [10][11]. - The company has closed underperforming campuses and terminated costly leases to improve its balance sheet and enhance earnings growth potential [11]. Group 3: Competitive Position and Valuation - APEI is currently trading at a premium compared to industry peers on a forward 12-month price-to-earnings (P/E) ratio, indicating strong market potential despite challenges in determining an optimal entry point for investors [12]. - The earnings estimate trend for 2025 has seen a 5.9% downward revision in the past 30 days, yet the year-over-year growth rate for 2025 earnings estimates stands at 130.9% [18][20]. Group 4: Challenges and Headwinds - APEI faces challenges from soft enrollment trends in the Rasmussen University (RU) and Graduate School USA (GSUSA) segments, with RU's enrollment declining by 1.3% year over year and GSUSA revenues decreasing by 8.4% [4][15]. - Elevated inflation continues to pressure APEI's bottom line, with general and administrative expenses rising by 10.7% to $142 million and instructional costs increasing by 1$295.7 million in 2024 [16].