Stock Analysis of UTI From The Value Investing Congress (2008)
Posted By: October 8, 2010
In the spirit of the upcoming Value Investing Congress which I plan on attending and reporting from, I found some interesting videos from the previous Congress in 2008 which I wanted to share. I discovered a total of 11 videos on the internet. Most of them are quite interesting, and informative.
I wrote about a brief summary of each video which I will be posting over the next few days, and embedded the video below.
It is important for context to understand that the conference took place in late 2008 at the height of the financial crisis.
In this video, three speakers discuss how to capitalize on variant perceptions via portfolio bets. By reviewing three industry leaders on a micro- and micromanagement perspective, investors should have a better understanding about how to invest their money intelligently. One stock mentioned is UTI, a continuing education institute. With their stock prices at an all time low, some may think it is a forewarning not to invest with the company. While this can be a red flag for some there are variant views of value investing which have made putting funds into UTI stock intriguing. While some skeptics say that tuition increases are too high, making it extremely difficult for students to afford going back to school, others think differently.
The variant view in investing in UTI that enrollment growth is forecasted to accelerate because of the demand of education and improved operations in the corporate environment. Analysts have also shown a great concern on the student lending industry and how that will affect how students are approved for financial aid and loans in the college arena. Experts in value investing feel these concerns are of no concern and overly focused on and that signs have already shown an improvement in performance. While current expectations are at about 60 cents for this stock, forecasters are expecting a reasonable increase to $2 or more.
UTI has about 16000 students in eight different states. They are the leader in the types of accelerated education and they actually have more than double the number of students over their competitors. With a strong relationship with OEM companies, they receive free cars, instructional tools, and specialized training. These relationships, totally up to 22, are the reason for the quality placement rate and default rate. Returns on capital within the recent years have been great; however, affordability has become the biggest issue today close to $30,000. Without an increase in grants and aide from the government are the reasons, why leads have not shown up ad reduced return on capital. With new enrollments increasing in 2010 these percentages will increase and will be counter reciprocal.