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| SPRING 2003 STREET WISE By Pallavi Gogoi
Santa Ana (Calif.)-based Corinthian (COCO ) has been a trailblazer in the area, with focused educational programs tailored for occupations such as medical and dental assistants in the health-care industry, where job shortages have been acute. The health-sciences courses have seen record enrollment, reflecting the conclusions of a report released last August by the Joint Commission on Accreditation of Healthcare Organizations that found 126,000 nursing positions were unfilled in hospitals nationwide. Corinthian's stock has had a one-year total return of 60% and a three-year return of 545% through Feb. 15, making it the No. 1 company in BusinessWeek's ranking of the top 50 performers in the Standard & Poor's SmallCap 600 Index. Now that its market capitalization has surged, it was promoted to the S&P MidCap 400 Index effective Mar. 12. "Corinthian has been so successful because its strategy is to acquire students, with the clear goal of getting them jobs," says Jerry Herman, an education analyst at Legg Mason Wood Walker. SLUMP CHANGE. And the future looks promising: Many workers are going back to school for additional credentials or to acquire new skills for a career change, since the economy remains in a slump. That set of conditions has led to a 38% annual increase in students, to 40,000 at Corinthian's 66 colleges located in 21 states. In its latest results for the six months ended Dec. 31, net income soared 90%, to $29.9 million, on revenue growth of 56%, to $242.8 million, compared to the same period last year. There's still a risk the weak economy might hurt Corinthian's ability to collect tuitions on time, and its fast-growth strategy might make it difficult to keep up with the high standards set by the Education Dept. Still, the company expects to sustain its annual revenue growth of 20% to 25% over the next several years and estimates revenue growth of about 45% for fiscal 2003. Corinthian was launched in 1995 by Moore and five other colleagues, who together bought 12 troubled post-secondary trade schools for $5 million from National Education Corp. Since then Corinthian, which went public in 1999, has achieved breathtaking growth rates through acquisitions of colleges in growing markets like California, Texas, and Florida. FOLLOWING THE NUMBERS. Corinthian recently acquired Learning Tree University, a continuing professional-education organization in Southern California. It's also expanding its Texas campuses in Arlington, Austin, and Dallas. These come on top of several acquisitions in California, Michigan, and the greater Chicago metropolitan area. Most of the courses typically offer diplomas and last from 4 to 12 months, with an 8-month average length. According to the Bureau of Labor Statistics, the percentage of professional and technical jobs in the U.S. grew from 15.7% in 1988 to 17.6% in 1998 and is projected to hit 19.4% in 2008. These are numbers that Moore tracks diligently, and they're where he gets his ideas, he says. In fact, he stays ahead of the curve by closely evaluating the job shortages reported in BLS data. He notices, for instance, that a shortage now exists in school teachers for grades kindergarten through 12, and he's now looking into how he can prepare a new program to meet that demand. Experts say traditional universities and colleges have often failed to be nimble enough to provide the basic training that's needed for many professions. "Corinthian has been astute at developing programs that are in demand and capitalize on a key weakness at traditional education providers," says Herman of Legg Mason. Consider Corinthian's course on homeland defense, created after the September 11 terrorist attacks. It trains building and facilities managers to fulfill new security requirements and prepare plans for disaster prevention and recovery. DIGESTION TROUBLE? Corinthian's technology programs also are quite diverse -- besides more traditional info-tech fare, the schools provide training for automotive mechanics, in addition to other mechanical skills. Going forward, Moore says many workers in areas where technology is constantly changing, such as cars and airplanes, will need to be replaced or retrained. "As the workforce begins to age and technology becomes obsolete, there will be many jobs to fill," says Moore, citing aviation technology as his next project. Corinthian also offers a criminal-justice program that's tailored to administrative jobs in police and fire departments. "One of Corinthian's strengths is that it's more diversified than others," says John Clancy, a portfolio manager who owns the stock at the Fifth-Third Small Cap Growth Fund in Cincinnati. Corinthian has so far been able to absorb the various colleges under its wing without much problem, and it's likely to grow by continued acquisitions in the future. But investors should be a tad cautious, given the integration challenges and the costs involved. Still, Corinthian clearly has been quick to adapt to changes in the job market. Today, education easily brings in the big bucks. And that trend may well gain momentum, as Corinthian and others continue to fill a need for occupation-based educational programs in an evolving economy. MARCH 24, 2003 Gogoi writes for BusinessWeek from Chicago Edited by Beth Belton |
