Apollo Group (APOL), owner of The University of Phoenix, continues to hit the cover off the ball - but many commentators seem to prefer to focus on the negative.

Let’s start with the positive.  Apollo grew enrollments by 22% year over year to 420,700.  Revenue has grown 23% over the last 12 months and net income 37%.  This company is clearly firing on all cylinders.

Even so, valuation is still compelling.  The stock is currently trading around $70 and they’re going to earn a little more than $4 a share in the year ending August 31, 2009.  They’ve got about $6.50 a share in net cash and short term investments on their balance sheet.  Back that out and we’re talking about a 15 multiple on this year’s earnings.

Critics focus on potential regulatory changes by the Obama administration.  In an article yesterday (“Can Apollo Make The Grade?” (subscription required)), Barron’s wrote:

Although it’s not clear how detrimental potential legislation could be at this time, it is an overhang that will be present in the coming months.  And if federal funds are funneled toward community colleges, this too could hurt Apollo’s enrollment.

Other commentators mention risks because of Apollo’s dependence on Title IV loans from the US Department of Education.

These are reasonable concerns but I believe they are already factored in and have been holding the stock back.  On balance, Apollo’s sterling fundamentals make it a compelling stock in my opinion.

Disclosure: Top Gun is long shares of Apollo Group (APOL).