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U.S. Bancorp Piper Jaffray Analyst Finds Strong Correlation Between Valuation And Attribute Scores in Proprietary Research Study

-As a Result, Analyst Downgrades Strayer Education, Inc., and Raises Earnings-Per-Share Estimate on ITT Educational Services, Inc.-

MINNEAPOLIS, Oct. 2 /PRNewswire-FirstCall/ -- In his latest edition of the Valuation Conundrum, released today, U.S. Bancorp Piper Jaffray Senior Learning Services Analyst Mark Marostica provides insight into what he believes are the drivers of the valuation differences among public post- secondary education companies.

Marostica's proprietary attribute analysis and scoring methodology, the cornerstone of his study, assigns numerical composite scores to companies based on results from 29 attributes in seven categories, which include: program quality, student quality, revenue visibility, enrollment characteristics, regulatory risk, campus-related characteristics and financial quality. Companies with higher composite scores are considered more favorable than those with lower scores. Marostica then compared the composite scores with each company's price-to-earnings (P/E) ratio.

Through his analysis, Marostica concluded there is a meaningful correlation between a post-secondary education company's composite attribute score and its P/E ratio. "Put simply, we have found that companies with higher composite attribute scores generally trade at higher P/E ratios," said Marostica. "We believe investors should be willing to pay more for a company with a higher composite attribute score. In addition, we believe our analysis will help investors identify and explain 'valuation disconnects' -- instances in which a company's composite attribute score is not aligned with its P/E ratio."

In this third edition of the Valuation Conundrum, Marostica's attribute analysis resulted in the following post-secondary education company ranking:

    Rank           Company Name
    1         Apollo Group, Inc. (APOL, Strong Buy, $68.17, #>)
    2         Strayer Education, Inc. (STRA, Market Perform, $98.79, #>)
    3         Career Education Corporation (CECO, Strong Buy, $47.72, #>=)
    4         Corinthian Colleges, Inc. (COCO, Strong Buy, $59.26, #>=)
    5         ITT Educational Services, Inc. (ESI, Outperform, $49.20, #>=)
    6         Education Management Corporation (EDMC, Outperform, $60.65, #>=)
    7         Sylvan Learning Systems, Inc. (SYLV, Outperform, $28.51, #>=)
    8         DeVry Inc. (DV, Underperform, $23.16, #>)


As a result of his analysis, however, Marostica is downgrading Strayer Education to Market Perform from Outperform. "We believe STRA shares have been 'bid up' over the last several weeks due to the STRA's limited float (10.7 million shares), coupled with Strayer's relatively high perceived investment quality as captured by our attribute analysis," said Marostica. "While Strayer had the second highest composite attribute score in our analysis (second only to Apollo) our valuation analysis flagged Strayer as an outlier given STRA's relatively high calendar 2004 estimated P/E (39.6 times)."

In addition, Marostica is raising his fiscal 2004 earnings-per-share estimate on ITT Educational Services by $0.03 from $1.48 to $1.51. "Although ITT appears to be an 'overvalued' outlier in our analysis given its relatively high P/E compared to its attribute score, we remain confident in the company's operating margin expansion initiatives, including its 2+1 hybrid program, its pure online program and new program rollout activity," said Marostica.

To receive a copy of Marostica's latest edition of the Valuation Conundrum, clients and members of the media should contact Dana Wade at dwade@pjc.com or 415-277-1556.

About U.S. Bancorp Piper Jaffray

U.S. Bancorp Piper Jaffray, a subsidiary of the consolidated group of U.S. Bancorp (NYSE: USB), is a focused securities firm comprised of two revenue- generating segments -- Capital Markets and Private Client Services. Clients of both segments are supported by Investment Research, an independent group reporting to the CEO. The firm provides a full range of investment products and services to individuals, institutions and businesses. The firm has over 124 offices in 25 states across the country. U.S. Bancorp offers a comprehensive range of financial solutions through U.S. Bank, U.S. Bancorp Asset Management, U.S. Bancorp Investments and U.S. Bancorp Piper Jaffray. For more information on U.S. Bancorp Piper Jaffray, visit www.piperjaffray.com .

The following disclosures apply to stocks mentioned in this report if and as indicated: (#) U.S. Bancorp Piper Jaffray (USBPJ) was making a market in the Company's securities at the time this research report was published. USBPJ may buy and sell the Company's securities on a principal basis. (^) A USBPJ analyst who follows this Company or a member of the analyst's household has a financial interest (a long equity position) in the Company's securities. (@) Within the past 12 months, USBPJ was a managing underwriter of an offering of, or dealer manager of a tender offer for, the Company's securities or the securities of an affiliate. (>) USBPJ has either received compensation for investment banking services from the Company within the past 12 months or expects to receive or intends to seek compensation within the next three months for investment banking services. (~) A USBPJ analyst who follows this Company, a member of the analyst's household, a USBPJ officer, director, or other USBPJ employee is a director and/or officer of the Company. (+) USBPJ and its affiliates, in aggregate, beneficially own 1 percent or more of a class of common equity securities of the subject Company. (=) One or more affiliates of U.S. Bancorp, the ultimate parent company of USBPJ, provided commercial banking services (including, without limitation, loans) to the Company at the time this research report was published. (*) A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. ** These companies have conducted initial public offerings of their securities and are currently in the "Quiet Period." As a result, there is no research available on these companies. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities of these companies. Additional information is available upon request.

    Investment Opinion: Investment opinions are based on each stock's return
    potential relative to the overall market*, not on an absolute return.
    Strong Buy: Expected to outperform the relevant broader market index over
    the next 6 to 12 months. An identifiable catalyst is present to drive
    appreciation.
    Outperform: Expected to outperform the relevant broader market index over
    the next 12 to 18 months.
    Market Perform: Expected to perform in line with the relevant broader
    market index over the next 6 to 12 months.
    Underperform: Expected to underperform the relevant broader market index
    over the next 6 to 12 months.

    * Broader market indices = Russell 2000 and S&P 500

    Volatility Rating: Our focus on growth companies implies that the stocks
    we recommend are typically more volatile than the overall stock market. We
    are not recommending the "suitability" of a particular stock for an
    individual investor. Rather, it identifies the volatility of a particular
    stock.
    Low: The stock price has moved up or down by more than 10 percent in a
    month in fewer than 8 of the past 24 months.
    Medium: The stock price has moved up or down by more than 20 percent in a
    month in fewer than 8 of the past 24 months.
    High: The stock price has moved up or down by more than 20 percent in a
    month in at least 8 of the past 24 months. All IPO stocks automatically
    get this volatility rating for the first 12 months of trading.

Nondeposit investment products are not insured by the FDIC, are not deposits or other obligations of or guaranteed by U.S. Bank National Association or its affiliates, and involve investment risks, including possible loss of the principal amount invested.

USBPJ research analysts receive compensation that is, in part, based on revenues of USBPJ Equity Capital Markets which include overall investment banking revenues. USBPJ research analysts who follow this Company report to the Head of Investment Research who, in turn, reports directly to the Chief Executive Officer of U.S. Bancorp Piper Jaffray.

This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This information is not intended to be used as the primary basis of investment decisions. Because of individual client requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. It is not a representation by us or an offer or the solicitation of an offer to sell or buy any security. Further, a security described in this release may not be eligible for solicitation in the states in which the client resides. Affiliates of U.S. Bancorp Piper Jaffray, including U.S. Bancorp and their respective officers or employees, or members of their families, may have a beneficial interest in the Company's securities and may purchase or sell such positions in the open market or otherwise.

Notice to customers in the United Kingdom: This report is a communication made in the United Kingdom by U.S. Bancorp Piper Jaffray to market counterparties or intermediate customers and is exclusively directed at such persons; it is not directed at private customers and any investment or services to which the communication may relate will not be available to private customers. In the United Kingdom, no persons other than a market counterparty or an intermediate customer should read or rely on any of the information in this communication.

Securities products and services offered through U.S. Bancorp Piper Jaffray, member SIPC and NYSE, Inc., a subsidiary of U.S. Bancorp. Additional information is available upon request.

SOURCE U.S. Bancorp Piper Jaffray

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding U.S. Bancorp's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.



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