May 6, 2009 - Corinthian College (COCO-NASDAQ) operates as a post-secondary education company in the United States and Canada. The company offers a range of diploma programs and associate's, bachelor's, and master's degrees. Its diploma curricula include medical assisting, medical insurance billing and coding, massage therapy, dental assisting, pharmacy technician, medical administrative assisting, automotive and diesel technology, HVAC, surgical technology, plumbing, electrical, nursing, aircraft frame and power plant maintenance technology, electronics, and computer technology programs.

In addition, the company provides its students with lecture halls, instructional labs, libraries, Internet access, and other facilities, as well as offers online learning. As of June 30, 2008, it operated 89 colleges in 24 states, and 17 colleges in Ontario, Canada under the Everest and WyoTech names. The company was founded in 1995 and is based in Santa Ana, California.

Think of Corinthian College as a phone company, where most costs are fixed. The large expenses are upfront with buying or building a campus space, just like laying wire for phones or putting up satellites. Once those buildings are established, the key to profitability is to continue to add students (or phone customers for telephone companies). Corinthian has been adding the students.

The third quarter report was just released (fiscal year ends June 30). The highlights were: earnings per share went to 29 cents vs 23 cents last year in the first period; revenues were higher by 24%. New student enrollment was up 20%. On the administrative side, the Chief Operating Officer was elevated to CEO, replacing Jack Massimino who will become the executive chairman.

Third quarter showed net income of $25 million compared to $11.8 million last year in the same quarter. Revenues reached $346.4 million. (Analysts expected $333 million). Total student starts were 31,755 for the quarter.

The CEO announced: "Unemployment is expected to remain elevated throughout 2009 and 2010 and we expect it to be one catalyst for enrollment growth during that time."

The company expects student start growth of 16 percent to18 percent in the fourth quarter. It had reported total student starts of 23,015 a year earlier. At the end of the second quarter, total enrollment was 76,165.

For fiscal 2009, the company sees earnings of 77 cents to79 cents a share, up from its prior view of 66 cents to 70cents. It forecast revenue of $1.29 billion to $1.30 billion for the year, up from its previous expectations of $1.26 billion to$1.27 billion.

One of the concerns any school has is student payment. Bad debts can be one of the largest expenses. The company stated it believes bad debt expense will decline this year. Furthermore, as enrollment increases, profit margins will rise.

The really good news: there is a proposal under consideration by the Obama administration that would increase funding for post-secondary students, and if passed, would definitely benefit Corinthian.

More numbers: Market Cap is $1.31 billion. Forward P/E is 14.24. Price to Book is 3.0. Operating margin for the last 12 months was 5.80 while Profit margin was 2.73%. There's total cash of $57.97 million. Total debt is $37.77 million. Current ratio is 1.577. Book value per share is $5.21. 52-week high was $21.73, low was $9.57. There are 86.22 million shares outsanding. Insiders own 21.6%.

To illustrate the volatility of the stock: late in 2007, it traded at $18.30. Within a month it was at $6.40. Within a year, it hit $21.70. Keep that in mind as you do more research on COCO. If bad debt becomes a bad problem, that kind of volatility will return. But if the new administration gives the nod for more funding to post-secondary schooling, look for this stock to do much better.

- Company Web site: www.cci.edu

- Ted Allrich