Nobel Learning Communities: Going after the prize

Education has been a minefield for investors and has lost much of its luster in recent years. Remember Edison Schools, Inc.? This is the company that was going to revolutionize public school education by managing schools better. Its shares hit a high of $40 before plunging to $0.14 and being taken private at $1.75 a share in 2001. As a private company, it has moved away from managing schools to providing supplemental educational services.

Federal investigations of everything from student loan abuses to inflating enrollment figures hit stocks like Computer Learning Centers, now bankrupt, and ITT Educational Services Inc. (NYSE: ESI), taking the shine off the for-profit publicly traded education company and keeping the sector somewhat undervalued.
 
Some companies are trying to buck this trend. One of them is Nobel Learning Communities, Inc. (Nasdaq: NLCI). The operator of more than 150 private schools in the pre-school through middle school range reported significant double-digit increases in revenue and income for the fiscal third-quarter ended March 31, on top of regular gains in previous quarters. After hovering around $10 for nearly two years, the stock has moved upward in the past six months and now trades above $15, giving NCLI a market cap of $160 million. The 52-week high was $16.34 in March and the low was $9.98 last August.
 
The company has a new $50 million financing in place and is ready to take advantage of growth opportunities. After selling one school in the third quarter, the company announced in May the sale of six schools that had been targeted for sale as part of the company’s divestment of non-strategic assets. The schools that were sold had been a drag on earnings. Net proceeds of $2 million in the six-school sale –  yielding an after-tax gain of $600,000, or $0.05-0.06 a share, for the fiscal fourth quarter ended June 30 – were used to pay down remaining debt under the facility so that the full amount is available for future acquisitions or capital expenditure.

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