Online courses click for recession-weary workforce
BANGALORE (Reuters) - It is back-to-school season for America's workforce as people turn to education for better degrees that would help position them better in a rapidly shrinking job market.
And many of them are clicking their way through to online courses, which gives them the flexibility to continue full-time jobs even as they chase a degree.
Online courses, such as those offered by Capella Education Co and Grand Canyon Education Inc, have gained acceptance with employers, students and recruiters alike.
Shares of most for-profit education providers saw spectacular spikes late last year but have lost some of their gains this year on fear of new regulations or increased scrutiny from the Democratic Congress and the Obama administration.
Investors are also concerned that once the economy improves, people might lose interest in further education.
However, analysts believe online education companies will fare better than traditional post-secondary education companies and, in the long term, will outperform the overall sector.
"For-profit online post-secondary education is at a sweet spot of education from a growth perspective," Barrington's Alexander Paris Jr said.
"Online for-profit will grow faster than for-profit. And for-profit will grow faster than traditional post-secondary education," he added.
For-profit education companies refer to technical, trade schools that are funded by the market. Traditional post-secondary schools include both public and private institutions.
The online education sector is expected to grow at least 15 percent this year and the publicly traded companies will grow their online operations in excess of 20 percent, according to Wedbush Securities' analyst Ariel Sokol.
In its most recent quarter, Capella's total enrollments grew 20 percent from a year earlier, while Grand Canyon enrolled 62 percent more students.
Compared with this, companies that provide mostly on-campus education showed lower growth. Enrollment at one such company, ITT Educational Services Inc, grew 22 percent in the latest quarter.
DeVry Inc, which provides both on-campus and online education, said enrollments at its DeVry University grew 19 percent, while online course admissions rose 27 percent in the spring quarter.
DeVry is also expanding its online offerings through its first online bachelor degree completion program in medical imaging and respiratory care.
Shares of Grand Canyon Education have dropped about 23 percent since the beginning of the year. Capella is down about 9 percent, and American Public Education Inc fell 7 percent.
LURE OF HIGHER DEGREES
Employers are beginning to accept higher education degrees from online institutions, contributing to their popularity, Richard Garrett from Eduventures, a research and consulting firm on the online education market, said.
Online education companies have more students in areas such as education, healthcare and criminal justice -- fields in which graduates have a much better chance of getting a well-paying job, William Blair's Brandon Dobell said.
Dobbell expects Bridgepoint, along with Grand Canyon and American Public, to log enrollment growth above 35 percent in 2009 and 2010, as they focus on undergraduates, which is a much larger market than post-graduate and doctorate degrees.
Capella is expected to grow about 20 percent in the same period, as it is more focused on sustainable growth over a long period of time, he added.
Barrington's Paris chose Bridgepoint Education Inc as his top pick among Capella, Grand Canyon and American Public Education Inc.
The company is regionally accredited, it is debt free and is a high free cash flow generator like its peers but "it is way cheaper than the other three," he said.
(Editing by Jarshad Kakkrakandy)
