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Bridgepoint Education: An Online Lesson On Squeezing Profits Out Of Education

 May 24, 2012 01:34 PM

(By Rich Bieglmeier) Online Public Universities may get a reputation boost from a study released on May 22nd by Ithaka S+R. The non-profit think tank that focuses on technology and education concluded that people of all backgrounds can learn just as well in a classroom or in front of a computer.

Six different public institutions taught an introductory statistics course to two control groups for the Ithaka S+R analysis. One group was placed in a more traditional classroom environment, and the other group using "prototype machine-guided mode of instruction" along with once a week face-to-face instruction.

The study was designed to answer three questions:


1.      Can sophisticated, interactive online courses be used to maintain or improve basic learning outcomes (mastery of course content, completion rates, and time-to-degree) in introductory courses in basic subjects such as statistics?

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2.      Are these courses as effective, or possibly more effective, for minority and low-socioeconomic-status students and for other groups subject to stereotype threat? Or, are these groups less well suited to an online approach?

3.      Are such courses equally effective with not-so-well-prepared students and well-prepared students?


Remarkable was the word used to describe the findings. Both control groups showed comparable results, with the online version scoring slightly higher, required 1.7 hours less time per week, and considerably more cost effective. However, the digital students found the experience to be less enjoyable and more challenging than a classroom.

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With tuition costs outpacing inflation, big time, and student debts piling up, Ithaka says the problem of "cost disease" may have met it fate as the crossroad of information technology and instruction. The intersection can save enrollees from 19 % to 57% in costs.

The authors do warn against "too much hype" as a result of the new study.  They say "To the best of our knowledge, there is no compelling evidence that online learning systems available today … can in fact deliver improved educational outcomes across the board, at scale, on campuses other than the one where the system was born, and on a sustainable basis."

In any case, the current crop of available online educators can use the findings to better their users' results and enjoyment, while enhancing credibility within the academic community.

As a group, online education stocks have been hit, and hit hard. Based on what iStock sees on their stock charts, many have the feel of additional minus days coming. However, the group is worth watching as the high, and rising cost of traditional, classroom degrees should make an internet education more attractive, despite the minor drawbacks.

iStock's favorite name in the space is Bridgepoint Education, Inc. (BPI). The San Diego based company trades for 7 times next year's earnings per share forecasts while profits and revenues are expected to grow by 10% and 11% respectively. The combo gives the stock an attractive PEG ratio of 0.56, a reading that is usually a good predictor of future outperformance.

Additionally, BPI is selling for 1.11 times sales, sports a hefty Return on Equity of 44.70%, and has no long-term debt.

It might take a while for Bridgeport to heat up, but when it does, it could turn into an inferno of buying as 56% of its float (stock available for trading) is short. BPI is a major candidate for a powerful short squeeze.

In the past year, Bridgepoint has traded as low as $16.01 and as high as $30.62. The average recommendation of the brokers covering the company is a buy with a price target of $28.44, a 45% gain from its current price of $19.63.

Shares could experience some further weakness and find support in the neighborhood of $17, which would be a good entry point in iStock's opinion. On the flip side, if BPI closes above $22, it could trigger technical buy signals and ignite some short covering.



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