What has been one of the top-performing industries over the past year? Five years? Would you guess Medical, Homebuilding, Security, or possibly Biotech? While all these have been good performers, the answer, surprisingly, is Education. The Education industry has returned over +25% year-to-date and more than +60% over the past year. Over the past five years the industry has returned a staggering +35% annually, ranking it as the top performer over that time period. Compared to the S&P 500, which has returned +21% over the past year and has lost -2% in the most recent five-year period, the Education industry's performance has been phenomenal.

Although a heated debate now rages as to whether the industry is overvalued (of course, we have yet to see a industry where there is no debate), this strong performer deserves a closer look. Except for a few scandals and other major news items that have taken place over the past year, Wall Street rarely takes an interest in this industry. To most investors, this still is an undiscovered investment area. Yet given its superior performance over the past several years, investor interest in Education stocks is likely to heat up in the coming years.

The Big Picture
Education remains one of the world's single largest expenditures. At over $1 trillion, it represents more than 4% of worldwide GDP annually. It is a service that virtually every person around the world uses at some point in his or her lifetime. Yet while gross worldwide expenditures on education are enormous, For-Profit Educators (FPEs) account for only a fraction of those funds.

At the current time, listed education companies concentrate mainly on post-secondary instruction; very few target lower grade levels or tutoring. Post-secondary (college-level) education has so far proven to be the most profitable niche for FPEs because this segment is where consumers spend the most dollars per student. In addition, educational services at this level can be readily delivered via the Internet. The industry is a rare survivor of the Internet boom years of the late 1990s. Though electronic educational courses were developed prior to this time, technological advances have made it possible to deliver this service on a much broader scale. Ironically, the industry benefited more from the collapse of the Internet bubble than from its rise. Millions of high-tech workers suddenly became unemployed and quickly sought new skills or training. Because these workers were already Internet-savvy, they were a natural fit for online training programs. This has led to stellar growth for many online universities throughout the past several years.

Huge Customer Base
Today, more than 90 million students are enrolled in post-secondary schooling around the world. Although most of these students are enrolled in traditional classes, the potential market for online education is enormous. Of the estimated 1.2 million degrees awarded in America in 2002, only 10% utilized some form of distance-based learning. Therefore, even though this industry has seen incredible growth in recent years, the market is far from reaching a saturation point. More and more students are choosing to conduct their studies remotely as opposed to physically attending classes. This is not just because of convenience, but also out of necessity. Our nation's collegiate population no longer consists primarily of recent high school grads. In fact, online educators mainly target a 24+ year-old student population. The majority of individuals in this group are already employed but are seeking out further instruction in an effort to develop a better skill-set. Traditional class-based education tends to be highly inconvenient for these people. By comparison, the flexible learning schedules provided by online education often prove to be the most viable option for this important market segment.

Public Acceptance
When online education first began in the mid-1990s, public response was very under whelming. The common perception was that online learning was a poor alternative to attending university classes for four or more years. In addition, it was thought that only lazy or less intelligent students would engage in this style of learning. Some even went so far as to warn that online education could ultimately undermine the entire educational structure as floods of gullible high school grads rushed toward the Internet. In reality, however, online education has not replaced traditional learning. Instead, it has complimented it. Many online programs today are nationally accredited and are taught by university-level professors. In the brief history of online education, qualified graduates have been generally well received and have given legitimacy to the online program.

Technological Advancement
Recent advancements in worldwide communications have been a major growth driver for online educators. The speed and quality of such courses has continued to improve. Meanwhile, communications costs have declined. Today it is possible to broadcast a live class session simultaneously to a group of students around the world. Merely a decade ago such a thing would have been considered just a fantasy. In particular, online education has enabled millions of students in lesser-developed nations to receive high levels of education without leaving their home country. Technology is now slowly beginning to close the education gap between many rich and poor nations.

Mergers and Acquisitions
Like financial services or information technology, online education is a perfect candidate for consolidation. Administrative and technology costs are essentially fixed no matter how many students a company adds. This means that educational companies tend to earn very high profit margins as they continue to add additional students into the fold. Because of this, bigger providers are continually gobbling up smaller ones each year. Although the industry is still highly fragmented, it would not be surprising to see perhaps just four or five major operators dominate the entire worldwide industry in the next ten or twenty years.

Education Companies:

Top Near-Term Industry Pick: Corinthian Colleges (COCO, $31.07)
Corinthian Colleges is one of the world's largest for-profit providers of post-secondary education. On the heels of strong growth and a series of recent acquisitions, the firm now operates 87 colleges in the United States and 46 in Canada. The firm currently derives the majority of its revenue from physical education facilities, where it boasts over 52,000 students that are enrolled a variety of associate, bachelor, masters and technical programs. The company was founded in 1994 and went public in 1999. Since then it has seen rapid growth through a series of smart acquisitions. Going forward, however, management has centered its attention on moving toward a more balanced growth model, as it hopes to fuel about half of its future growth through internal expansion.

Leader in High-Demand Areas
Corinthian offers degree programs in such popular areas as: business, healthcare, information technology and criminal justice. In fact, the firm is the world leader in producing healthcare professionals. Recent trends in the U.S. job market bode well for Corinthian, as the percentage of professional and technical jobs is increasing in the United States every year. This figure is set to jump from +17.6% in 1998 to an estimated +19.4% in 2008. Universities everywhere are seeing increasing demand for high-paying degrees. Currently, over 20% of all undergraduate degrees are awarded in the Business field alone. The continued outsourcing and decline in manufacturing jobs has driven the recent trend to re-education.

Corinthian is also strong in technical areas like diesel mechanics, HVAC, aviation and electrical technology -- areas that are often overlooked by educators. These highly skilled and labor-intensive jobs are suffering a tremendous shortage of workers. They have declined in popularity with the information revolution as workers have chosen “white-collar” employment. Ask anyone who has recently hired an electrical, air conditioning, or automotive repair specialist and they will tell you this shortage has driven up the wages in these fields. Higher wages will undoubtedly drive an increase in enrollment of students looking to learn these skills, and Corinthian will benefit from this trend. A purely online education provider will find it very difficult, if not impossible, to compete with the extensive physical network of hands-on schools that Corinthian already has in place.

Growth in Online Education
Although Corinthian already boasts two branches that specialize in online education, the firm has plenty of room to grow in the online arena. Management currently does not provide actual forecasts into the growth rates it expects to see in its online divisions. However, one of the firm's online units taught 1610 students in the most recent quarter, representing a +364% increase over the previous year. Given that the firm still derives only a small percentage of its annual revenues from online education, we expect the firm's presence in this lucrative area to grow by leaps and bounds in the years ahead.

Looking at the overall growth picture, Wall Street currently expects the education industry as a whole to grow at a healthy +13% annual clip over the next five years. However, Corinthian is forecasted to grow at a +24% rate -- nearly double the industry average. As we mentioned above, education firms tend to earn higher profit margins as they add more and more students to their existing locations. We expect Corinthian to continue to add new students both domestically and internationally at an increasing rate for the foreseeable future. With that in mind, the firm should have no trouble delivering above-average growth in the coming years.

Special Deal for Our Web Site Visitors Act now and we'll send you a copy of our newest in-depth research report -- StreetAuthority's Top Ten Stocks for Spring 2006 -- plus one full year of Paul Tracy's Market Advisor newsletter, all for just $49.95 per year.

The Bottom Line
Corinthian has implemented its growth and acquisition strategy quite well. Revenues have been skyrocketing -- up +55% in the first three quarters of fiscal 2004 alone (Corinthian’s fiscal year ends June 30). Meanwhile, the firm's net income has increased at a +30.5% clip over that same time period. Looking at earnings per share (EPS), the firm expects to deliver EPS of $0.94 this year and $1.28 next year, a +36% increase. Same-school revenues have increased +26% so far this fiscal year, outpacing management’s expectations for long-term growth in the neighborhood of 20-25%.

Everything seems to be going Corinthian’s way at the moment. Investor interest in the shares has soared in recent months. In addition, the stock boasts a rare 5-star rating from S&P and has benefited from several recent analyst upgrades. The main area that analysts are watching, and which management is now working hard to address, concerns the company’s gross margins. As mentioned earlier, the firm's margins should expand as it adds more students to the fold. Over the past year, however, the firm's margins have declined slightly as the firm has spent additional cash to integrate all of its new acquisitions and curriculums into one structure. Given management’s exemplary track record in the past, we believe this is a temporary bump in the road for the firm.

Corinthian's shares have pulled back in recent weeks along with the overall market, providing investors with an excellent entry point for a near-term investment. In addition, given the enormous potential the firm has in the booming for-profit education market, as well as its leading position in a number of important degree areas, my staff and I have decided to add the shares to our Bellwether Portfolio. We will do so at the opening bell on Tuesday, May 11th, and we'll initiate coverage of the firm with a "Buy" rating and a 12-month price target of $42.

Corinthian Colleges (COCO, $31.07)
Market Capitalization:  $2.8 billion
Shares Outstanding:  89.7 million
30-Day Average Volume:  1.6 million shares
2003 Revenue:  $517.3 million
2001 EPS:  $0.30
2002 EPS:  $0.43
2003 EPS:  $0.71
2004 EPS:  $0.94 (estimate)
2005 EPS:  $1.28 (estimate)
Five-year expected growth rate:  +24%
Institutions own 87% of the firm's outstanding shares
52-week range:  $21.60 - $36.19
----------------------------------------------

Other Notable For-Profit Education Companies:

Career Education Corporation (CECO, $66.87)
Career Education is the world’s largest private operator of on-campus, for-profit training centers and colleges. The firm focuses on equipping students in the following areas: visual communication and design technologies, information technology, business studies, culinary arts and healthcare. It offers programs from technical certificates to doctoral degrees in 79 centers around the world.

Market Capitalization:  $6.7 billion
Shares Outstanding:  100.4 million
30-Day Average Volume:  1.9 million shares
2003 Revenue:  $1.2 billion
2001 EPS:  $0.42
2002 EPS:  $0.71
2003 EPS:  $1.18
2004 EPS:  $1.78 (estimate)
2005 EPS:  $2.28 (estimate)
Five-year expected growth rate:  +25%
Institutions own 92% of the firm's outstanding shares
52-week range:  $28.50 - $70.91
----------------------------------------------

Apollo Group, Inc. (APOL, $91.97)
The Apollo Group is the world's oldest and largest online educator. It is comprised of four distinct schools, the cornerstone being its 85% stake in the University of Phoenix. Apollo operates 75 campuses and 125 learning centers in North America, where it boasts an industry-leading 227,800 students enrolled in its combined programs. The firm's University of Phoenix online subsidiary is expected to grow at a better than +50% clip next year.

Market Capitalization:  $16.2 billion
Shares Outstanding:  179.1 million
30-Day Average Volume:  1.6 million shares
2003 Revenue:  $1.3 billion
2001 EPS:  $0.61
2002 EPS:  $0.88
2003 EPS:  $1.30
2004 EPS:  $1.78 (estimate)
2005 EPS:  $2.26 (estimate)
Five-year expected growth rate:  +24%
Institutions own 77% of the firm's outstanding shares
52-week range:  $51.73 - $96.41
----------------------------------------------

ITT Educational Services (ESI, $40.80)
ITT is a world leader in post-secondary technical education. It operates 77 technical centers in 30 states throughout the United States with an enrollment of 38,000 students. ITT offers associate and bachelor degree programs as well as technical certificates.

Market Capitalization:  $1.87 billion
Shares Outstanding:  45.7 million
30-Day Average Volume:  1.3 million shares
2003 Revenue:  $522.9 million
2001 EPS:  $0.70
2002 EPS:  $0.93
2003 EPS:  $1.27
2004 EPS:  $1.69 (estimate)
2005 EPS:  $2.08 (estimate)
Five-year expected growth rate:  +20%
Institutions own 95% of the firm's outstanding shares
52-week range:  $26.45 - $60.75

11 Surprising Investment Predictions for 2009 A wind-powered car . . . oil at $160 per barrel . . . a +200% to +300% rebound in shipping stocks... a war fought over water . . . these are just a few of the startling predictions that StreetAuthority Market Advisor has just revealed for 2009.  Each of these developments will trigger explosive profits for investors in the coming year.  Click here to see our full range of forecasts. Income Security of the Month -- January 2009 If you're looking for high yields, monthly payments and unprecedented safety, then you need to learn more about our "Income Security of the Month" for January 2009.  This stable preferred stock has a long track record of paying some of the most dependable dividends in Wall Street history.  It pays a monthly dividend totaling 9.9% annually and has outperformed the S&P 500 by more than +52% over the last year.

The Top Stocks to Own Before Obama Takes Office Whenever Washington decides to help a new industry get off the ground, the investment profits follow in lockstep.  And a small group of 20 to 30 stocks is going to be flooded with so much new government cash that our research team believes a few of them could shoot up 40-to-1 in the next three or four years.  This group of investments was a good bet even before Obama was elected . . . now it's a slam dunk.  Wall Street Meltdown Creates Highest Dividend Yields in a Decade The recent Wall Street crisis has created a once-in-a-lifetime opportunity for investors like you to lock in high yields on safe, low-risk stocks. Yields of 20.2% . . . 22.4% . . . even 33.1%!  Our new special report on the subject shows you SEVEN dividend superstars that can help you rebuild your portfolio.  Click here to get your free copy of the report.